By Charles Power
Many employment contracts use the definition of a trade secret as a type of confidential information that must be kept confidential.
Like confidential information, a trade secret is information that is not accessible in the public domain. However, the concept usually refers to a secret that is not something that ‘people in the know’ would normally deal with. It has commercial value because it is secret within your organisation and is usually subject to measures by you to keep it secret.
Trade secrets are different to registered patents or trademarks, or things that have copyright, such as specific computer software, musical or published works. Trade secrets are intangible and the information is recorded on paper, computer drives, in the minds of employees and the cloud.
To get a court order to secure a trade secret you need to show to a court that:
- you can identify information with sufficient specificity that has the “necessary quality of confidence” about it;
- there is a relationship of confidence with the person against whom you are seeking an order, i.e. they have an obligation not to misuse information – this is usually imposed in a commercial agreement or employment contract; and
- the person against whom you seek the order is misusing or threatens to misuse or disclose the information to your detriment.
Most cases are won or lost at the interim injunction stage. If you can show a person has misappropriated documents recording the trade secret, you are more likely to succeed than if you are simply restraining the person from using knowledge in their head.
In my experience, one of the key problems facing my clients in seeking a court order to protect a trade secret is that the secret has to be identified. It is possible to protect the secrecy of the information in this process by seeking undertakings from the lawyers that the information be confined to the lawyers. However, clients are not often prepared to take this risk.
For those that are prepared to take the risk, it will be easier to show that information has the necessary quality of confidence if the various steps taken to keep it secret can be explained to the court.
You might consider creating a secure record of your trade secrets using Blockchain technology.
Cloud-based IT systems may not be secure, given most cloud providers will use standard form contracts which invariably seek to exclude or restrict liability for loss to or unauthorised access to data.
If you have an area in your business, such as a workshop, where confidential new products are developed or where secret processes are used, you should confine access only to those who need to be there.
A record of a trade secret such as a confidential business proposal or customer list should be marked as confidential.
You should include appropriate confidentiality provisions in employment agreements, including post-employment restraints. You should also include these in agreements made with third parties to whom you need to disclose confidential information.
You should issue policies about confidential information and the creation and ownership of intellectual property, and educate and train new and existing staff about these, so they know what is confidential in your organisation and the safeguards that apply to maintain the secrecy of that information.
Finally, you should adopt appropriate exit arrangements for departing staff, including provision for the return of records of information retained by them and reaffirmation of continuing obligations. You might also examine their email records or check for after-hours access or unusual photocopying.