Trade Secrets, Confidentiality, and Your Employees

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The recent wrangle between Twitter and Threads has put trade secrets and business IP into the news. It serves as a good reminder that employees and employers may part ways, and when they do it is important to ensure that a business’s IP, including trade secrets, is adequately protected.

What are trade secrets?

There is a lot of information online about different types of IP but confidential information and trade secrets are often forgotten about as a valuable source of IP. Trade secrets are intellectual property rights relating to confidential information. Trade secrets in the UK are governed by a combination of the Trade Secrets (Enforcement, etc) Regulations 2018 (SI 2018/597), and by the common law on confidentiality.

To qualify as a trade secret, the information must:

  • be commercially valuable;
  • only be known to a limited group of people; and
  • give the holder of that secret a competitive advantage.

Trade secret protection forms a part of the law of unfair competition, as a way of helping businesses protect their valuable secrets from potential competitors in the marketplace. Many companies rely heavily on trade secrets to protect their IP, for example to protect foundational recipes or source codes. Famous examples of closely guarded trade secrets include the recipe for Coca-Cola, the recipe for Irn Bru and Google’s algorithm for ranking search results.

Unlike a trade mark, patent or copyright, trade secrets do not expire or require any kind of renewal; as long as they remain a secret and the business takes reasonable steps to protect them, they benefit from protection.

The business is responsible for making sure it has taken all possible steps to protect its trade secrets. This can include:

  • Limiting the number of people who know the secret, and ensuring they are aware of the confidential nature of that secret; and
  • having confidentiality agreements within employee contracts, and making sure those confidentiality provisions continue for a period of time after the employee has left the business.
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Provided you have taken reasonable steps to keep your trade secrets confidential, you can take action against anyone who has gotten access to and is using the secret, even if you don’t have a contract with them. You cannot, however, stop someone from using the same technical or commercial information if they got that information by themselves, for example through R&D or marketing analysis. It is also worth noting that “reasonable steps” is inherently ambiguous. Legislation and case law do not offer a prescriptive definition, and what steps are to be considered reasonable for a company can vary widely depending on any number of factors, including the nature of the secret and business or size of the company.

Another way you could protect your business’s IP internally is to have employees sign non-compete agreements, or include non-compete clauses in their employment contracts. These might say that an employee can’t leave to work for a competitor, or can’t set up a business that competes with yours. These clauses usually apply for a defined period of time after employment and must be carefully drafted to ensure they are enforceable. For example, it might be tempting to include a very restrictive clause but there is a risk that being overly restrictive could be challenged in court, and may even be struck out entirely, leaving you unprotected.

You can also include similar wording in agreements with other businesses, particularly where those businesses are in the same or an analogous field to your own. Such clauses, known as non-solicitation clauses, usually stipulate that the other business cannot try to poach your employees or contractors during and for a certain period of time after your agreement with them.

In addition to contractual measures, a business can take practical steps to protect trade secrets. Depending on the nature of the trade secret, this can include:

  • prohibiting employees from taking certain information off-site;
  • marking confidential documents as such;
  • enforcing a clean-desk policy;
  • protecting electronic files with passwords, firewalls, automatic intrusion detection systems and/or authentication measures; and
  • limiting access to confidential information on a need-to-know basis.

Finally, businesses should ensure their employees are adequately educated and kept up to date on internal confidentiality measures. This can include training sessions on the proper handling of confidential information, and maintaining an up to date internal trade secret policy that employees can access.

The Intellectual Property team at MBM Commercial is experienced in advising clients on how to protect their IP, including trade secrets, both internally and externally. Ensuring confidentiality is essential to keeping a business competitive in the marketplace, but the legal regime surrounding trade secrets requires careful consideration to ensure adequate protection that is strong enough to withstand being challenge.

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