Personal Finance

How to protect business secrets from staff theft

Terms of employment could help safeguard company’s intellectual property. PHOTO | FOTOSEARCH
Terms of employment could help safeguard company’s intellectual property. PHOTO | FOTOSEARCH 

It is important for employers and human resource personnel to understand how to guard confidential information such as trade secrets and intellectual property (IP) from possible theft by employees.

This is especially relevant for businesses in the innovation sector and heavily depend on research and development.

In some businesses, all employees are expected to contribute to innovation while in others only a few staff or a department are involved. In some, for example, university research projects, consultants are hired to work on the project.

The first thing to understand is the general term of employment of the staff member. Is the employee permanent or hired on a contract basis?

The business also needs to distinguish between an independent contractor and an employee. In the case where all members of staff are expected to participate in innovation, then the employment contract should be general and similar for all staff members.

Where it is only a few select members or a department then their contract should look different. When it comes to independent contractors, the venture contract should include issues of intellectual property.

Why is it important for an employer to safeguard IP in the employer-employee relationship? It must be understood that an employee is the one who has access to a lot of the businesses’ confidential information. This should be safeguarded from third parties.

Secondly, an IP is not only a right but also a property that should be protected just like any other company assets. The employer-employee relationship is never permanent and is subject to termination at any time.

Therefore, it is prudent for employers to plan for anticipated disputes which may affect IP. Planning for any dispute has an element of risk reduction techniques. Therefore, having in place good IP policies in as far as employees are concerned, mitigates any risk that would arise in the event of a labour dispute.

There are two main ways an employer can hedge IP risk in the employment relationship. One is the strongest, and that is, the employer should get IP protection for all business innovations and in this way, they belong to the company. If the employee does anything contrary to the employer’s rights, then the employer would sue from an intellectual property law angle.

The second tool to use in protecting IP is the employment contract. One important clause to have is the one on ownership.

Depending on the nature of the contract, the employer can be listed as the sole owner of IP creations or in the event of motivation and talent management, the employee can be given some ownership.

The second item in the contract is the confidentiality and non-disclosure clause which bars an employee from disclosing an IP subject matter without consent. Lastly is the restrictive clause, limiting the employee’s use of the IP subject matter post-employment.