Protecting your most valuable business asset - Murray Procter

1. Protecting your most valuable business asset
Challenges, Risks and Best Practice
Murray Procter, Partner

2. Confidential information
Prevention
Deterrence
Responses
Changing nature of the workplace
Overview

3. W h y i s t h e p r o t e c t i o n o f
c o n f i d e n t i a l i n f o r m a t i o n a n d
i n t e l l e c t u a l p r o p e r t y i m p o r t a n t ?
o One of the most valuable assets of a business – offers a
competitive edge in the marketplace
o Increase in number of disputes about misuse of
confidential information and intellectual property and
unlawful competition by employees and directors
o Growth of new technology and social media
o Law offers little protection as of right – up to employers to
take action

4. Scope for damage to business
What could it cost?
o Employee fraud
o Disclosure of confidential information
o Competition – working for a rival, or setting
up in direct competition
o Solicitation of clients, suppliers, other
employees and contractors

5. Confidential information
examples
o Trade secrets
o Information in relation to the business,
operations or strategies
o Intellectual property or other property
o Actual or prospective clients, suppliers or
competitors
o Strategy or planning material
o Financial information and business plans
o Sales procedures
o Know-how
o Policies and procedures
o Computer software and programs
o Client lists
o The information must be regarded by the
business as confidential
o Information is not confidential if it is in the
public domain

6. Common law duties
o Implied duty of “good faith and fidelity”
o Duty not to appropriate the employer’s property or
confidential information
o The common law characteristics of confidential
information:
o The fruit of considerable skill and effort
o Jealously guarded by the employer and not able
to be acquired by others without considerable
skill and effort
o Employees must be informed that the information
is confidential
o Uses and practices in the industry must confirm
that such information is treated as confidential
o Only those who “need to know” permitted to
share in the information
These exist even if not written down

7. Drafting contractual clauses
o Senior employees and
employees who have
client/customer contact
or are the ‘face of the
business
o Should be included in
employee’s initial
contract of employment
o If employee changes
roles, a new clause
should be inserted into
the contract
o Express obligation
supported by
consideration e.g. salary
review
o Deed (without needing
consideration)
Existing employeesHow?Who?

8. Confidential information
Confidentiality clauses
o Define the categories of information which will be deemed confidential – can extend beyond common
law definition
o Define the circumstances in which information will lose its confidentiality
o Can require the employee to actively ensure that confidential information is not disclosed
o Can be helpful in the absence of a non-compete restraint, but to a more limited extent
o One size does not necessarily fit all

9. Contractual
clauses
Post-employment protection
o Clearly define the specific information which is
agreed to be confidential
o Restrict the activities in which the ex-employee would
be likely to use confidential information
o Prohibit the ex-employee from competing for a
period of time and/or working in a defined location
o Prohibit the ex-employee from soliciting clients,
suppliers, employees or contractors
o Remind resigning employees of ongoing obligations

10. Reasonableness
Factors
o Whether the parties have agreed to the terms at arms length
o Whether the parties were on an equal footing when negotiating the restraint
o Whether the restraint duration is referable to a business cycle or some other relevant consideration
o Whether the parties have expressly agreed that the restraint is reasonable
o Whether the employee has received consideration

11. Key steps for protecting
confidential information
Before After
o Contracts
o Policies
o Training
o Monitoring
o Restricting access
o Remove the device from the network and
secure
o Be mindful of issues of privilege and
tainting evidence
o Seek professional guidance prior to
conducting any analysis
o Garden leave

12. Misuse of confidential information by
existing employee
o Seeking out and disclosing internal confidential information can be a ground for dismissal
o Royal v Cheetham Salt Limited
o Emails about management bonus
o Internal restructuring plans
o Complaint by manager some staff not working full day
o Valid reason to dismiss despite no direct benefit to employee

13. Developing a social network
policy
Establishing expectations
o Build on existing policy
o Code of conduct
o Acceptable use of IT resources
o Develop specific policy for:
o Social media platforms
o External blogging
o Forums
o LinkedIn

14. Fighting back
What you can do
o Injunctive relief
o Anton Pillar order
o Damages
o Account of profits
o Corporations Act 2001
o ss 182 and 183

15. Fighting back
• - Plaintiff must be able to identify and show with specificity, and not
merely in global terms, that which is said to be the information in
question;
• - The information must have the necessary quality of confidentiality
(and is not, for example, common or public knowledge);
• - The information must have been received by the defendant in such
circumstances as to import an obligation of confidence; and
• - There must be an actual or threatened misuse of that information,
without the consent of the plaintiff.
Expectations of the Courts

16. Conclusion
Key steps for protecting confidential information
o Audit – what safeguards for what employees
o Contracts – have the right clauses
o Policies – clear statement of intent about confidentiality and social media
o Training – reinforce confidentiality
o Monitoring
o Restricting access – taking steps to demonstrate confidentiality

17. Murray Procter
Partner
Phone: (07) 3001 9225
0402 967 171
Email: M.Procter@ClarkeKann.com.au