The courts have consistently held that confidential information created in the course of an employee’s employment belongs to the employer but what is meant by the term “in the course of employment.” Unlike copyright works and patentable inventions where ownership of the IP is important, the key issue with confidential information is how to keep it confidential during and beyond an employee’s term of employment. The prevailing view from the courts is that while it is legitimate to restrain an employee from disclosing the processes of an employer that are genuinely the employer’s property (subject to this restraint not being unreasonable), it is contrary to public policy for an employee to promise not to use the general “skill, knowledge and experience” gained with one employer for the benefit of a new employer or for his or herself. Unfortunately, the distinction between an employee’s knowledge, skill and experience and the confidential information belonging to the employer, is often very difficult to draw.
How do you effectively restrain your employees from using all your valuable experimental protocols for the benefit of a future employer? The starting point is for the company to treat the protection of information seriously and consistently, as a court is then more likely to infer that the information is confidential and to provide a remedy in the event that a former employee misuses the information. The following steps by an employer will help give rise to this inference:
- clearly identifying the information which is important to the company and restricting access to it eg. not leaving documents lying around the office for anyone to view and restricting access to the premises for non-employees
- warning employees that particular information is sensitive and should be treated as confidential and explaining the serious implications to the company of any misuse
- requiring employees to sign confidentiality agreements. It is probably better practice to require only those employees who have access to confidential information to sign these agreements, and
- desirably any confidentiality agreement should include a post employment competition restraint which must be drafted carefully to protect no more than the employer’s legitimate business interests.
While as a general rule, a company will own the IP developed by an employee in the course of the duties he or she was engaged to perform, this is not the case with respect to IP developed for the company by an independent contractor. In most circumstances the rights will be owned by the independent contractor, and not the company. For the company to own this IP, it will need to have the independent contractor expressly assign its rights in the IP to the company. This is something which can and should be incorporated in the agreement by which the contractor is engaged. From a copyright perspective, it is particularly important that this assignment be in writing and signed by the independent contractor, since an assignment of copyright will not have effect unless in writing and signed on behalf of the assignor. Likewise, an assignment of a patent must be in writing and signed by or on behalf of the assignee.
Common examples of independent contractors are contract research organisations or external experts hired to carry out particular aspects of a projects.
The primary asset of many companies are their intellectual property and proprietary information. For a company to protect these assets, it is vital that the scope of its employees’ duties is clearly defined and that the employment documentation ensures that the employer retains control of these assets. In preparing this documentation care should be taken not to draft assignment or restraint clauses too broadly to prevent the possibility of being deemed void as unreasonable restraints of trade.
If you require further information on this subject please contact Pattens Group on 1800 PATTENS or your legal representative.
