Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Imagine you’ve just found out that one of your ex-employees has joined a competitor and has shared your most important trade secret with them. What legal protection do you have?
Recently, the Government of the United Kingdom added a new layer of statutory protection by enacting the Trade Secrets (Enforcement, etc.) Regulations 2018 (the Regulations). The Regulations took effect on June 9, 2018.
The new Regulations set out the remedies available when trade secrets have been unlawfully used or disclosed and provide measures by which courts can keep trade secrets confidential whilst such remedies are sought. This article highlights key points that employers with employees in the UK may need to know.
What is a trade secret?
A trade secret is a commercially valuable piece of information that gives an enterprise a competitive advantage. The quintessential example of a trade secret is the Coca-Cola recipe.
Under the new Regulations, a “trade secret” means information that is:
- has commercial value because it is secret; and
- has had reasonable steps taken to keep it secret by its owner.
While a long-standing factor for trade secret protections in the United States, the third element (to take “reasonable steps” to protect a trade secret’s confidence) is new in the UK as per the Regulations.
The Regulations allow for trade secret holders to enforce their rights through interim measures, injunctive relief, and other remedies.
What do the new Regulations mean for employers?
The Regulations provide an additional course of action available to employers that are seeking to act to protect their trade secrets. Employers can apply for remedies under existing breach of confidence rules in addition to or as an alternative to remedies under the Regulations where such actions provide wider protection than under the Regulations. It’s not clear at this early stage how these actions will interrelate in practice. At the outset, we expect that most employers filing claims in the High Court will plead both actions to give themselves the best chance at success.
Since the Regulations implement an EU Directive that aims to provide better enforceability across the EU, employers should work to ensure that they can show that they have taken “reasonable steps” to protect their trade secrets by. For example, such steps may include:
- ensuring that trade secrets are protected in employee contracts and confidentiality agreements through non-disclosure clauses and restrictive covenants;
- restricting access to trade secrets to only those who are under confidentiality obligations by limiting email distribution lists or only making available in hard copy;
- labelling documents as confidential;
- encrypting files or using password protection;
- updating security policies, such as introducing and enforcing a ‘clean desk’ policy, implementing appropriate information control methods and banning the use of private emails at work. Employers may also wish to require employees to sign a document confirming that they have read and agree to such policies;
- rolling out training for employees to raise their awareness of trade secrets and how to handle that information; and
- requiring that employees who leave sign a document confirming that they have returned all copies of trade secrets in their possession and that they will not use or disclose any company trade secrets following their exit from the business.
When recruiting and on-boarding, employers should also consider new employees’ restrictive covenants and explore whether new employees are bringing with them any trade secrets. This assessment becomes important because under the new Regulations, acquisition, use or disclosure of a trade secret may be unlawful if the user knew or ought to have known it was a trade secret, posing a potential risk of liability to employers if they do not carefully consider such issues when hiring.