Posted: Monday, 26 September 2011 @ 17:43
It is quite often the case that the most valuable assets of a business are its intellectual property such as trademarks and copyright, but do not overlook the important value of trade secrets.
Trademarks and copyright are out in the open, and any infringements can be protected by appropriate court action. But what about the trade secrets? These could be manufacturing processes, perhaps recipes in the food and drinks industry, and the very important research and development of products which have not yet hit the market.
In the global market Coca–Cola® have famously protected their recipe for many a decade, and the giants of Apple® and Microsoft® develop their products in secrecy to prevent their rivals stealing a march upon them. Closer to home the high flying Dyson® empire are continually researching on the cutting edge of domestic and office appliances. All these corporate giants put a huge amount into protecting their secrets.
But secrets can also amount to mundane information such as a sales strategy, a customer database, internal communications, financial information, including an internal intranet. In fact anything which is unique to your business, and is not out in the public domain.
So how can you protect your secrets?
First of all you should do an audit to identify your valuable trade secrets which you wish to protect. Then you should do a risk assessment. How might the outside world get access to your secrets?
Threats will of course come from the outside. Perhaps a threat will be hacking of your I.T system. Perhaps another will be visitors to your premises who can gain access to information. Perhaps another will be contractors who you deal with who are given access by you to your premises and personnel and information.
It may be necessary to establish a vigorous security system for visitors to your premises, depending upon the level of risk and possible losses. It may also be necessary to ensure that your written contracts with outside agencies protect your secrets by preventing their disclosure or use other than for the purposes of the contract in which they are engaged.
But perhaps the greatest threat may well come from within. Your employees.
The measures you take will of course depend upon the likely damage to your business if your secrets are divulged. But in the very least you should ensure that all your contracts of employment from the top to the bottom of the organisation contain vigorous terms preventing the disclosure or use of your secrets otherwise in the course of employment by you. And do not forget agency workers who may not usually contract directly with you. You may have a contract with the agency but it is important to have a direct obligation from anyone working on your premises or for you whether as an employee, a contact worker/ agency worker.
These contracts should make clear provision as to what happens after the employment or contract terminates. There may be a restraint of trade clause to stop the person competing with you after they have left. There should certainly be a clause preventing them from taking any assets of the company, including the trade secrets.
There is no guarantee that the courts will uphold the contract restrictive terms, but without them you will have a difficult task in establishing your rights. Some activities or information might be considered public knowledge, some may have an element of illegality allowing a whistleblower to go public, such as in the case of bribery contrary to the new Bribery Act. And unless your contracts are very carefully drawn, the courts may strike out whole sections as unenforceable.
See also our recent blog on non disclosure agreements.
It is clearly important that whatever your position, either needing to draw up appropriate contracts or requiring advice on possible breaches, to protect your trade secrets you should take expert legal advice.
Business and Litigation Solicitor
Tel: 0845 003 5639
Blog by Nigel Musgrove
Nigel has been providing dispute resolution advice as a solicitor for over 35 years. As well as advising SMEs and business owners on disputes he also offers a specialist licensing law service. View profile
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation
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