Businesses that invest time and money in their business practices do not want to lose these when an employee leaves and joins a trade competitor. These practices are commonly referred to as trade secrets.
What is a trade secret?
It is a way of conducting their business that is unique to them and which gives them a competitive advantage over their competitors. This ‘know how’ does not have legal protections in the way trademarks or patents do. However, there are still ways business owners can seek protection from the misappropriation of their trade secrets. If this set of events happens to your business be sure to contact your solicitor before the former employee’s action causes damage to your business.
Steps to be taken to protect trade secrets.
a) Employment Contract: ask your solicitor to draft for inclusion in your employee contracts an air-tight clause forbidding the employee from disclosing trade secrets on leaving their employment. Also, be sure to define what the trade secrets are.
b) Decide what employees have access to the company’s trade secrets.
c) Put in place safeguards so that other employees cannot access this confidential information.
Regulations
The European Union (Protection of Trade Secrets) Regulations 2018 has a mechanism for protecting trade secrets within the EU and defines a trade secret as:
This Directive should assist business owners greatly in seeking to keep their trade secrets from coming into the possession of its competitors. The protection is not absolute but prior to the Directive coming into force, taking legal steps for breaching a company's secrets was harder to establish.
Breach of confidence – Common Law remedy
In addition to the EU Directive there is an old Common Law remedy for seeking protection for breach of confidential information. This relies on an employee’s duty of confidence to their employer. Ideally this should be covered with the contract of employment under a confidentiality clause but while a Common Law case can still be made in the absence of a formal confidentiality agreement, its absence makes it harder for the employer to prove its case.
In order to establish an action for breach of confidence under the Common Law, three conditions must be fulfilled:
a) The information was secret to the business owner.
b) Access to it by employees who were obliged to keep it within the company and not disclose it to non-employees.
c) That the employee wrongfully communicated it
An acceptable defence to such an action would be to claim and prove that the information was already in the public domain.
An aggrieved business owner concerned that a competitor has acquired their trade secret can seek an injunction to prevent its use until a full hearing of the action.
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