Protecting the Assets of your Business
Intellectual property and confidential
information are valuable assets of any business.
Many businesses may
not understand or fully appreciate the value of that intellectual
property and confidential information. They may also not become aware
of the detriment to their business if this is not protected and/or
becomes available to their competitors, until it happens. A business'
"competitive edge" may depend upon practical and legal measures
taken to protect those assets.
adopt practical preventative strategies to protect their intellectual
property and confidential information, minimise the risk of problems
which necessitate litigation. Litigation imposes considerable burdens
on a business (in terms of executive time and legal costs), particularly
in a breach of confidence action, because of the complexity of the
evidence to be provided.
IS INTELLECTUAL PROPERTY?
The term Intellectual
Property refers to a range of items including products, designs, packaging,
processes, artwork and procedures and includes confidential information.
It should be identified,
documented and protected.
Protection can be
through common law rights (through useage) and/or legislation.
of Intellectual Property
The person who creates works (literary, artistic, dramatic,
graphic etc) is the owner of the copyright in those works unless:
the work was created, he was employed by another party.
In which case the works belong to the employer.
is a specific arrangement between him (as the creator) and
the party for whom he is creating the work that the copyright
should vest in that latter party. Copyright does not protect
concepts and ideas. However, it provides protection for
creative expressions of such concepts and ideas. For example,
drawings, photographs, plans, advertising layouts etc.
Trade Marks are signs (words and/or logos) used by a business.
They may identify a company or a business, goods or services
etc and distinguish them from those of other traders. Registration
of Trade Marks is divided into different classes depending upon
the intended use of the Trade Mark. Registration is Australia-wide
and you can also seek registration in other countries.
examples are brand names like Coca Cola and the "golden
arches" McDonald's Logo.
New products and processes may be able to be patented if
they are novel, involve an inventive step and are industrially
applicable. Registration of patents is Australia-wide and patents
can also be registered in other countries. Patents generally
give the holder a 20 year monopoly.
This can allow registration of a new or an original visual appearance
of an article or product. It can be in respect to both 2 and
3 dimensional objects.
You should be aware that the author/designer of intellectual
property retains moral rights therein which can enable him/her
to exercise some control over the use of the item. For example
if Leonardo Da Vinci had painted the Mona Lisa now, he as the
author could influence how it was used even if he had sold the
original painting to the Louvre. He could, for example, object
to its use to advertise cigarettes on the basis that this was
not in keeping with his creation. The author/designer should
be acknowledged on the item. This is a potentially difficult
area which you may need to take specific advice upon.
for Protecting Intellectual Property
Firstly, you should
be aware of the intellectual property which exists in your business
and is created by or for it.
If an employee or
contractor is engaged by your business, ensure your contractual documentation
specifically provides that all intellectual property created by them
is the property of your business.
Ensure that the intellectual
property is properly identified and documented.
Then consider whether
the intellectual property should be specifically protected as a trade
mark, patent, design etc.
Sometimes, you can
choose to protect it by keeping it confidential. The formula for making
Coca Cola is an example of protection by secrecy/confidentiality.
WHAT IS CONFIDENTIAL INFORMATION?
can be a wide range of information. It may be commercial or technical
("trade secrets"); literary or artistic, know-how; and is
information not in the public domain. This could include customer
lists, price lists, product lists, procedures (marketing, accounting,
administration, manufacturing) by which your business is operated.
The essential element
of confidential information is that the information must be secret.
This means that the information must not be known to persons who have
no obligation of confidentiality to the owner of the information.
Obligations of confidentiality are protected by common law.
Strategies for Protecting
Some practical measures
which may be adopted to protect confidential information (including,
where appropriate, intellectual property) include:
Internal Security Procedures
Clearly marking documents
as Aconfidential@ and securing them (for instance, in a safe or a
locked filing cabinet). Your computer systems should be set up with
Apasswords@ to limit and deter unauthorised access.
Reinforce with your
personnel the confidential nature of documentation and the need to
keep it secure.
can arise both during employment and when employees cease employment.
During the period
of employment, an employee has a duty of good faith and a duty of
confidentiality to the employer. The employee must not act in a way
that is damaging to the employer's business.
After employment ceases, the employee retains
the right to use any general skill, experience and knowledge he has
acquired in the course of performing his normal duties, in order that
he can continue to earn a living. This has to be balanced against
the employer's right to protect its confidential information. If the
employee has retained any confidential information, he is not entitled
to use that information without the employer's authority.
or Confidentiality Agreement
sign Employment Agreements to generally detail the terms of their
employment. These should also include appropriate clauses which restrain
the employee from making any unauthorised use or disclosure to third
parties of confidential information during their employment and after
their employment has ceased. Agreements should be signed before the
employee commences employment. Existing employees should be encouraged
to sign confidentiality agreements. However, usually they cannot be
forced to do so.
should only be disclosed to employees who need to know that confidential
information to carry out their duties.
be regularly instructed about their duty of confidentiality. Employees
should also be encouraged to adopt a 'clean desk' policy requiring
that all papers be locked away at the end of the day. Familiarity
can lead to people forgetting that a document is confidential.
When employees cease
employment, the employer should give them a letter confirming this,
any monies being paid to them and reminding them of their confidentiality
obligations. The employee should also be requested to return all property
belonging to the employer and to sign an appropriate acknowledgement
confirming that he has done so and will keep information confidential.
If your business
engages independent contractors to perform work, then your agreement
with the independent contractor should include:
An obligation of confidentiality
on the part of the contractor.
An acknowledgement that the confidential
information disclosed to and/or developed by, the contractor
will be treated as such.
If the contractor's services for
your business are to be performed by its employees or subcontractors,
you should also have those employees or subcontractors sign
a confidentiality agreement.
Your business may
need to disclose their confidential information in many other circumstances,
Disclosure of financial information
to your bank.
Disclosure of a new product or
idea to your advertising agency.
Negotiations on new business opportunities.
At the discussion stage before parties know whether they will
deal with each other, disclosure of confidential information
about one or both party's business can occur.
to sell your business or where a party wishes to take equity in
your business - that party will usually require to conduct a due
diligence of your business.
When deciding whether
to disclose confidential information in business dealings, assess
the risk depending upon the context and take appropriate preventive
action including signing a confidentiality agreement.
If confidential information
is to be divulged, a confidentiality agreement should be signed before
the disclosure is made.
The type of agreement will vary depending upon
the nature and context of the disclosure. A simple exchange of letters
may be sufficient or a formal confidentiality agreement may be required.
In some cases, a confidentiality agreement must be made as a Deed
in order to be legally enforceable. This is where there is no consideration
expressed for the agreement to keep information confidential.
agreement should include the following acknowledgements:
the information is secret;
is made to the recipient in confidence;
will not disclose the information to others or use the information
for their own advantage, without the prior authority of the owner
of the information; and
disclosure of the information could cause loss and damage to the
owner of the information and the recipient will be liable for
FOR BREACH OF CONFIDENCE
The common law action
for a breach of confidence is used to protect confidential information.
There is no registration system for confidential information (as is
the case with other forms of intellectual property, such as Trade
Marks, patents and designs).
The Courts may provide
remedies (eg. injunctions) to prevent the unauthorised use or disclosure
of confidential information. If the disclosure or misuse has already
occurred, the Courts may award appropriate compensation in the form
of an account of profits or damages.
To succeed in an
action for breach of confidence, you must establish that;
the information is confidential;
the information was disclosed in
circumstances demonstrating an obligation of confidence; and
use of the information to the detriment of the owner has been
It may be difficult
to successfully prove a breach of confidence action if you do not
have a confidentiality agreement.
procedures and (if possible) registration are the best forms of protection
of intellectual property and confidential information.
This article is general in nature
and for information only. It should not be acted upon without obtaining
specific legal advice.
©Anne Hodgson & Co Lawyers,
Tel: 03 9578 7444 Fax: 03 8677 2962 Email: firstname.lastname@example.org