Confidentiality/trade secrets

Confidentiality agreements

A confidentiality agreement is used to stop employees from revealing secret knowledge during and after their employment. You should back up your trade secrets with signed confidentiality agreements with every person who has knowledge of the secret. That way if an agreement is breached, you will have evidence of what was agreed to and protection through the law.

Confidentiality agreements can be made with anyone (employees, business partners, business associates, research academics and so on) whom you wish to impose an obligation of confidence on, regarding the use and disclosure of your confidential information.

Trade secrets

A trade secret is both a type of IP and a strategy for protecting your IP. It can provide effective protection for some technologies, proprietary knowledge (know-how), confidential information and other forms of IP.

A trade secret is appropriate when it's difficult to copy a product. This may include the construction or formulation of the product or the process of manufacturing the product when reverse engineering is unlikely.

Treating your IP as a trade secret is also appropriate if your IP is unlikely to result in a registrable right or if you want to retain exclusive use beyond the term of a patent.

The best known example of a trade secret is that of the Coca-Cola recipe. The company has used trade secrets to keep its formula from becoming public over a period of decades. It never applied for patent protection, so it was never required to disclose the formula. One disadvantage is that trade secrets do not provide any legal security against an independent competitor inventing an identical object.

What if someone infringes my trade secret?

Common law provides protection for infringement of trade secrets, breach of confidentiality agreements and passing off trade marks.

What should I be aware of?

Secrecy does not stop anyone else from inventing the same product or process independently and exploiting it commercially. It does not give you exclusive rights and you are vulnerable when employees with this knowledge leave your firm.

Trade secrets are difficult to maintain over a long time or when many people know the secret. Proving a breach of confidentiality under common law can be complex and is potentially more costly than defending registered rights.

When contractors and employees leave, you should ask them to provide written undertakings that they will not compete with your business after they leave, in addition to signing a confidentiality agreement. It is often much easier to prove competition than breach of confidentiality.

These undertakings are difficult to enforce and need to be prepared by your legal adviser. You need to be careful that the undertaking does not restrict the contractor's or employee's right to earn a living.

Last Updated: 28/10/2015

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