Legal Column: This belongs to...
Written by Philip Bartlett
The old adage that knowledge is power runs particularly true when it comes to maintaining a competitive advantage in business. The ongoing Motorola case has brought industrial espionage to the fore again with Motorola claiming that twelve employees set up a rival firm in 2002 and subsequently stole trade secrets over a period of five years. For Motorola, to a large extent, the damage is already done, as experts speculate that the costs involved in this case will be extremely high, no matter the outcome. For other employers, the case is a cautionary tale, clearly demonstrating the need for action to prevent security breaches.
Employee misuse of IP can be very costly to employers both in terms of losing IP to competitors or being sued if a new employee brings with them IP they shouldn’t. However, it’s extremely difficult for businesses to avoid the risk of security breaches as employers are obliged to give their workforce some access to intellectual property (IP) in order to do their jobs in the first place.
So what can they do to defend themselves from the enemy within?
Industrial espionage lawsuits are very common in the United States but historically have been less so in Europe. However, European employers can and should think proactively about protecting themselves against employee IP misuse. There are a number of measures that can be put in place but appropriately worded contracts are at the heart of any effective IP policy. By inserting confidentiality and intellectual property clauses into employment contracts, the employer underlines the seriousness of any potential IP misuse and clarifies the company’s legal position in the event of any breach. In addition to confidentiality and intellectual property provisions, employers should think about gardening leave and post termination restrictions. Keeping an employee out of the market for a period may be necessary in order to protect trade secrets and will make it much harder for them to transfer valuable IP to their new employer.
Additionally, employers should review confidentiality policies regularly and make sure that these are rigorously enforced. The more specific and detailed an employer can be about what is confidential and what is not; the better. It is also helpful to get the basics right e.g. ensuring that all sensitive documents are clearly marked confidential and password protected where possible.
Confidentiality policies will only work if employers support them with disciplinary action. This might seem severe but if the policies are not strictly enforced they may be open to abuse.
Prevention, not cure
Prevention is always better, and cheaper, than a cure so it goes without saying that employers should also make strategic use of technology to make security breaches- either by staff or third parties – much more difficult to achieve. Monitoring employees and their communications, may, for example, be deployed to great effect if the circumstances demand it.
1. Ensure employment contracts contain confidentiality and intellectual property provisions, including gardening leave and post termination restrictions.
2. Review all confidentiality and intellectual property agreements regularly.
3. Implement strict document control policies including marking all confidential documents as confidential and apply password protection as far as possible.
4. Prevent breaches before they happen: use monitoring technology where needed.
5. Ensure procedures are followed by implementing checks and enforcing action when needed.
Roald Dahl’s Willy Wonka famously employed Oompa Loompas in his chocolate factory because he knew that they would not be able to communicate with his competitors. Alas this foolproof strategy is not an option for today’s businesses where employees have to have access to privileged information and there is always a risk that they will abuse this trust. Robust policies will at least limit the potential damage and keep breaches to