A companys trade secrets are one of its key assets and global organisations need
to keep it secure and limit their exposure to legal risks, as DLA Piper explains
Q: I am in-house counsel for a global organisation and have been asked to
advise on how we protect our confidential information. What factors should
be considered when seeking to achieve this?
A: Every business has information it considers integral and invaluable to its
success, and a competitive edge in the marketplace may rely on a business having
or developing certain information above and beyond that of its competitors. In this
challenging economic climate, the need has never been greater for employers to
protect that information.
Confidential information can be subject to threats from outside the business owing
to theft, hacking or commercial espionage. However, the biggest threat to
confidential information often comes from inside the business. Many employees
will have access to valuable knowledge about customer contacts and financial and
strategic business intelligence in the course of their employment, all of which will
be an attractive asset to any competitor seeking to encroach on the employers
market.
Employers can and should take steps at the beginning of the relationship with new
employees to protect their trade secrets, confidential information and business
contacts. Employers can minimise issues by:
putting in place a tailored contract, including confidentiality provisions,
restrictive covenants and a garden leave clause and keeping them under
review as circumstances change over the life time of an employment
relationship;
limiting access to confidential information to those who require it and
labelling documents as being confidential;
including a confidentiality policy in the staff handbook that complements
the confidentiality provisions in the contract of employment;
putting in place a social media policy that sets out clear rules on the use of
social media sites during working hours, on company-owned equipment and
any equipment owned by employees. It should also contain rules about the
disclosure on those sites of company information or information belonging
to the companys customers and suppliers or other third parties. The policy
should also state the extent to which (if at all) social media sites can be used
by employees to store business contacts;
implementing a strict electronic communications policy that clearly
distinguishes between the rules for personal and business use.
The companys disciplinary policy should tie in and cross-refer to each of these
other policies. The disciplinary policy should clearly state that misuse of
confidential information will constitute gross misconduct and could lead to
summary dismissal.
carrying out training. Policies must be available and properly communicated
to the workforce. They must also be complemented by appropriate and
regular training. The training should reiterate the companys rules to ensure
that employees are in no doubt about their obligations. Employers should
ensure they take a register of attendees at training and that the attendance is
recorded on the individuals personnel files. This should assist the employer
in demonstrating employee awareness of the information the employer
deems to be confidential and employee knowledge of the rules regulating its
use and disclosure should a dispute arise.
The number and type of disputes about misuse of confidential information and
unlawful competition by employees and directors has significantly increased in
recent years. The use of springboard injunctions together with damages claims
provide employers with the ability to protect confidential information. Employees
automatically have duties to their employers not to knowingly misuse or
wrongfully disclose their employers confidential information during employment.
However, when employees leave their employment, the business can be less well
protected.
Therefore, in drafting restrictive covenants, employers need to take into account:
the role the employee will have in the business and the protection likely to
be required should they leave to join a competitor. How are the business and
the role likely to evolve?
consistency of treatment across the business for employees carrying out the
same type of role;
not restricting the employee for any longer than necessary. If they are only
going to have access to confidential information that has a limited shelf life
before it is in the public domain, the duration of the covenants should reflect
this;
if the employing company is involved with different types of businesses, the
employee should be restricted only in relation to the part of the business in
which they were personally involved;
avoiding drafting the covenants too widely. They should focus on
prohibiting the activities in which the ex-employee was involved for the ex-
employer; and
if including a non-compete covenant in the contract, consider the
appropriate territory for the restriction; the employee should not be
prevented from working everywhere but only in the markets where the
company does business and in which the employee was involved.
Protecting secrets
Changes within the workplace have also given rise to new challenges in protecting
confidential information, particularly the growth of new technology and social
media and the globalisation of business. With employees bringing their own
electronic devices to work and social media allowing employees access to client
contact information both inside and outside work, it makes protecting confidential
information a constantly evolving area. Privacy and cross-border data protection
laws add a further complexity. It is likely to be only a matter of time before such
issues come before the courts. Litigation in the UK and elsewhere has also
highlighted the difficulties associated with protecting confidential information
cross-border.
Employers must therefore be urged to take a careful look at the information they
are concerned to protect and to conduct an assessment of the risks that may result
in its disclosure or loss. They should then consider the measures they have to take
to achieve effective protection. In the current economic climate, employers cannot
afford to be complacent; now is the time to equip the business with the tools it
needs to protect its secrets and limit its exposure to legal risks.
