As a business owner, you probably protect the information most critical to your operations and to your competitive distinctiveness by, amongst other measures, only sharing it on a need-to-know basis, so preventing your ideas from being used, copied or shared by others.
But while a need-to-know basis is a good starting point for disclosures outside your business, sometimes it's a bit harder to control disclosures when it comes to what happens inside your business. That's where statutory and contractual protections come in very handy.
Employees: Contractual and statutory protections
Employees will normally have a contractual duty due to their employment contract to keep your business' confidential information and trade secrets secure and safe from any third-party scrutiny. This is important, since while they are working for you, they will unavoidably have access to, or indeed be creating, much of your confidential information, and you won't want that leaking out during, or after, their employment with you.
In addition to the contractual obligations that you impose on them, your employees also have a statutory duty to keep certain information confidential: your trade secrets and secret processes. But this is best reinforced by the contractual terms of their contract with you. If you didn't have the contract term as well, the statutory obligation on the employee may not last, in its entirety after they leave.
Employee statutory duties in relation to your trade secrets and secret processes should continue to bind them even after they leave their job with you.
But other forms of confidential information, like customer lists, business strategies, financials and projections, would not fall within that category and without contractual protection, could lawfully be disclosed by an employee. And in some cases, disclosure of these to a rival business or even to one of your customers, could do just as much harm to your business as the disclosure of something categorised as a trade secret.
So, make sure you always have a contract in place with your employees, that it describes clearly, what you consider to be your confidential information and how you expect this confidential information to be handled and respected by the employee, during and after, their engagement by you.
Take real care as well in drafting these contract terms and any restrictions that you want to impose on your employees, particularly those that extend after they leave the job.
There are quite strict rules around how long these restrictions can last, how they are judged to be reasonable (and therefore enforceable), and what you are entitled to do in the event of them being breached by the employee.
Our separate guide to restrictive covenants covers these elements. If this is an area you're interested, take a look at this guide and seek expert guidance when you're drafting them, or looking to enforce them.
Automatic legal protection for trade secrets
For information to be automatically legally protected, it needs to be classed as a 'trade secret'.
This means that:
the owner of the information has
- made reasonable efforts to keep
- the information secret
having not shared it at all, or
- only having done so demonstrably
- in a strictly confidential manner, and
its commercial value is dependent on its secrecy.
While trade secret protection doesn't require registration, has no time limits, is automatic, and doesn't need disclosure to the government, relying on this protection alone, does have its downsides too.
For example, a trade secret isn't protected against someone who discovers it independently - meaning a competitor is technically allowed to work out the ingredients, mechanics, of something and then recreate it (this is known as 'reverse engineering').
And as we mentioned already, in the absence of contractually supporting obligation,
As you may have read in our guide to intellectual property, and our guide to Confidentiality: are you keeping your IP and data safe?, there are other ways you can keep your business' information secure.
Tips for protecting your trade secrets
1. Ensure your contract terms are clear on what you consider to be secret and how employees should handle that information. Also make sure that your staff handbook and supporting employment policies are equally robust, so that they provide optimum legitimate protection to your business
2. Only share trade secret information on a strictly need-to-know basis
3. Where possible, keep trade secrets under strong security measures, whether physical or technological
4. Write the word 'confidential' on all documentation that contains information about your trade secrets (but don't use it on materials that are not confidential, as you could end up negating it's potency and ability to protect you)
5. Ensure your employees have agreed to restrictive covenants
6. Use non-disclosure agreements (NDAs), where appropriate
7. Make sure you collect all business-owned property (both physical and technological) and disable passwords from employees who are leaving the business
8. Act as quickly as possible if you suspect your trade secret confidentiality protection is compromised (not just to take legal advice, but also to consider whether there are forensic and data evaluation tools that may help mitigate risk and cost - our experts can help you with all of those services).
If a former or current employee breaches trade secret confidentiality
Take legal advice. One thing your adviser will probably discuss with you is whether these are circumstances that merit an emergency application to court for an order (called an 'injunction') that immediately stops the employee from taking any further action connected with your confidential information.
An injunction won't just help you to stop the employee from using the information for competitive advantage. You may also be able to claim financial compensation if damage to your business or financial gain for the employee (and potentially its new employer, your rival), has resulted from the information breach.
If you have restrictive covenants agreed to by your employees, this process should be a lot simpler than if you don't. To find out more about the types of restrictive covenant you can impose on employees and how, read more in our guide to restrictive covenants.
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