24 January 2013
Protecting trade secrets and other confidential information
Now is a good time for businesses to check whether their trade secrets and other confidential information, like customer lists and databases, are effectively protected. We focus on the steps to take to protect your business secrets from employees, ex-employees and others.
Information is confidential if you do not want people outside the business to know about it. It can include information about customers and customer deals, your strategy and marketing plans, your pricing, your suppliers, your operations and structure, your inventions, blueprints and drawings etc, your manuals and your employees. Confidential information is sometimes called 'trade secrets' or 'know-how'.
To improve your chances of stopping employees from giving away your confidential information, or taking it with them when they leave:
• make sure they know which information is confidential, using staff policies, induction and ongoing training
• ensure that they are legally bound not to disclose confidential information to outsiders unless authorised to do so – particularly after they have left
For example, information security, email and computer use policies can require confidential information to be marked as such, and stored securely. Password protection on employees' computers, and secure rooms or cabinets, with access given to selected staff only, will protect digital and hard copy information.
Your disciplinary procedures should make it clear that disclosing confidential information can result in disciplinary proceedings and, if the breach is serious enough, dismissal.
Employees' contracts of employment should contain clauses prohibiting them from disclosing confidential information to anyone outside the business, including after they have left.
Handle with care
Such clauses – called 'restrictive covenants' – are interpreted by the courts in the employee's favour. If they are too widely drafted, so they effectively stop an ex-employee from earning a living, or from doing so in too wide a geographical area or for too long a period, they will be ignored by the courts.
They should therefore be drafted by specialist legal advisers, who will ensure they are specific to the firm, its business and the employee, to ensure they are not too wide to be enforceable.
Contractors and other outsiders
Contractors or other outsiders, such as web designers, sales agents or outside investors, could find out your confidential information because it is in a document, because someone tells them something confidential, because of something they see when at your premises, or because they have had special access to your products, records or software (perhaps because they are a contractor doing work for you).
Ask them to sign a confidentiality or non-disclosure agreement, requiring them to keep any confidential information they learn about your business secret. They should sign this as early as possible – before you disclose anything about your business to them.
For legal advice on protecting confidential information from employees or ex-employees contact employment law partner Jo Davis.