Trade secrets are a form of intellectual property; in broad terms, they are information which only a particular business knows, and which it uses to gain an advantage over its competitors. Trade secrets are an important part of a business and it is therefore essential to protect them.
Theft of trade secrets by hackers, former employees and third-party contractors is a major risk facing businesses. Once public, trade secrets are no longer protected, and companies have no legal recourse unless they can prove that the information was both valuable and secret, and that it was disclosed by a person with an obligation to keep it secret.
In order to protect trade secrets, companies should:
- maintain inventories of their trade secrets;
- secure their computer networks;
- monitor employees' electronic use;
- provide training to employees on the handling of trade secrets;
- develop corporate policies on trade secret protection; and
- require that anyone exposed to trade secrets sign a non-disclosure agreement; where this party is an employee, a restraint of trade agreement may also be used to ensure trade secret protection.
The courts are reluctant to enforce excessively onerous restraint of trade agreements as these restrict employees' rights to practise their trade and make a living. The courts will critically consider whether the employer has a valid interest that is worthy of protection through a restraint of trade agreement, and will look at the employer's business and the employee's role within it. If an employee has never been exposed to the employer's trade secrets, a restraint of trade agreement may not be appropriate.
Companies should therefore ensure that confidentiality and non-disclosure agreements are drafted carefully in order to supplement the employee's common law duty to safeguard his or her employer's confidential information.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.