Protecting confidential information- employees

In the absence of an employment agreement, during their term of employment an employee is subject to an implied 'duty of fidelity'. This includes the duty to maintain the confidentiality of any information, which the employer treats as confidential, regardless of whether it would be legally confidential.

Independent contractors are employed for their skills and expertise, which already form part of their own knowledge. Therefore, they are not bound by an implied duty to restrict the use of their skills in the place of employment. To protect the confidentiality of an employer’s internal systems and protocols, where contractors are employed it is recommended that employers;

  • section off certain areas of the workplace;
  • allow only restricted access to certain information; and
  • arrange for them to sign written contractor confidentiality agreements.

Points to remember

  1. Once employment terminates for any reason, the employee is no longer under any duty to maintain confidentiality. Therefore, during employment, an employer should set the terms upon which certain confidential business practices are to be applied.
  2. An implied duty on the employee restrains an employee from using his or her time or skills for the benefit of any commercial competitors. However, upon leaving, the employee is free to apply the skills and expertise, which have become part of their own general knowledge in any subsequent employment. For this reason, the contract of employment should contain specific clauses defining the obligations that will be imposed on the employee once their employment ceases.
  3. An employer cannot easily or fully restrict a former employee's use of information. The law does not prevent a former employee making use of his/her acquired skills and knowledge with a new employer.
  4. Where an employer has a complaint, it may be easier for the employer to prove that the former employee seeks to use confidential information gained whilst in their employment, rather than complaining based on application of an acquired skill.

Commercialisation of IP

In some cases, an employer may some disclose details about their IP without ensuring a confidentiality agreement. As a result, secret and confidential information that may be protected is lost if the owner reveals the information publicly. When evaluating whether trade secrets are really secret, courts look at the measures taken by owners to guard secrecy.

When is Information is confidential:

When it involves any scientific and technical information, or information relating to an invention, discovery or new product and before a patent is granted or the design is registered.

Where there is no confidentially agreement signed

Where there is no confidentiality agreement, the person to whom the information is disclosed is not under any obligation to keep that information confidential, and can communicate that to others, placing it into the public domain. Moreover, the confidential information is not subject to any obligation of non-use whereby the employee can use the information disclosed in any way he or she chooses.

Examples where you as the IP owner might disclose confidential information relating to an innovation or process are:

  • discussing the specifications of a new product with prospective manufacturers to establish manufacturing needs and costs;
  • disclosing details of a new invention to a prospective designer to assess the suitability of that person undertaking the design work;
  • disclosing details of a new invention or product to a prospective financier;
  • disclosing details of a new invention to a prospective licensee or other type of partner;
  • disclosing details of a new invention to a prospective research and development partner;
  • demonstrating a prototype of a new product to a prospective manufacturer, designer, financier, licensee, or other type of partner; and
  • sharing details of an invention with friends or colleagues for assessment and feedback.

Recommendations

It is highly recommended that where employers and inventors have secret and confidential information relating to software, inventions or novel ideas that they legally protect themselves by having a written confidentiality agreement in place, in order to place on notice that the person you communicate the information to is under a legal and common law obligation to keep that information confidential.

 

Authors:

George Josephides LLB | Principal Partner | TST Partners Lawyers

Ph: +61 3 8080 1525 | Fax: +61 3 8678 1026 | gjosephides@tstpartners.com.au

Disclaimer:

This publication only provides an outline of areas of law and should not be used as a substitute for legal advice. This publication is provided on the understanding that TST Partners Lawyers Pty Ltd do not take responsibility for any errors or omissions in this work, for persons acting on the information contained in this work or from any action which might arise from reliance on this publication. TST Partners Lawyers Pty Ltd disclaim any liability that may arise from reliance on the contents of this publication.

 

 

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