Nov 21

How do I stop a former employee or competitor from taking all my business secrets?

Written by Jonathan Mortimer
Partner

DDI: 01423 726608
M: 07850 993952
E: jonathan.mortimer@raworths.co.uk

Employees are frequently entrusted with confidential information relating to your business during the course of their employment.  When they leave your employment and move to a rival, your confidential information including commercially sensitive details can be at risk.  Perhaps the employee wants to impress his or her new employer with sharing their experiences or the new employer may have decided to engage the former member of staff for the very purpose of gaining information that will assist them in the market place.

How do you protect your business in these circumstances?

The duties your former employee has to your business

An employee is under an implied duty of confidence in respect of both confidential information and trade secrets while they are in your employment.  Once they have departed, there are two lines of attack.

Primarily, to ascertain what their contract of employment says on their duties of confidentiality following departure and further what their post-termination restrictions may say as to their ability to engage with a competitor.

Secondly, if you can prove that your confidential information was obtained by the employee while they were employed and is now being used by them to compete with you, or else it was stolen by the employee and is now being used to advance the interests of one of your competitors remedies may be available.

In such circumstances, it may be possible to apply to the Court for an injunction to restrain the employee from acting unlawfully.

Where the employee has been planning an assault on your business for some time, it might be possible to apply for a special type of injunction known as a ‘springboard injunction’ which is specifically designed to limit, or where possible eliminate, the advantage or head-start that an employee or one of your competitors might gain through the unlawful use of private information that rightfully belongs to you.

It is also important to remember that your business may also have options against the new employee or indeed any third party who has been given or somehow obtained the confidential information.

The remedies against a rival business in possession of your information

It is important to consider what you are able to protect at the outset and the threshold tests for taking action.

In respect of protecting confidential information you need to show that:

• the information you are seeking to protect has a quality of confidence about it, e.g. because it is known to only a few people, it has intrinsic commercial value and you have taken steps to ensure it remains private
• you have shared or disclosed that information in circumstances which gave rise to an obligation of confidence, e.g. in circumstances where the recipient knew, or ought to have known, that the information was confidential and should therefore be kept private
• there has been actual or threatened unauthorised use or disclosure of that information which has or is likely to cause you detriment

In respect of trade secrets you need to show that:

• the information you are seeking to protect is secret, because it is not generally known or readily accessible
• it has commercial value because of its secret nature
• you and anyone else lawfully in control of the information have taken reasonable steps to ensure that it remains classified

If the information is suitably sensitive, you may be able to apply to the court for an emergency injunction in order to prevent your private information from being used or disclosed any further and, where appropriate, to ensure that any copies of that information are returned and that any products or goods unlawfully made or created in reliance on it are destroyed.

It may again be possible for you to apply for an injunction where you are able to prove, to the satisfaction of a judge, that:

• you have strong grounds for alleging that a breach of confidence has occurred which entitles you to seek appropriate redress
• your interests are being, or are likely to be, prejudiced as a result of the breach
• an award of money alone, known in legal terms as ‘damages’, will not be an adequate remedy for the prejudice you have already suffered or are likely to sustain

You may also need to prove that the balance of convenience dictates that an injunction ought to be granted. This will usually be possible where you can show that the harm caused to you if your application is refused would be greater than the harm caused to your opponent if your application were to be allowed, even where it later transpires that the imposition of an injunction was not in fact justified.

You need to think carefully before applying for an injunction because, either before or quickly after your application is made, you will need to issue a formal legal claim in respect of the breach of confidence that you allege has occurred.  This could expose you to lengthy proceedings as the court tries to establish exactly what has happened and whether you are entitled to the redress claimed.

Given the often draconian nature of injunctions, you will also usually be expected to give a cross-undertaking in damages.  This is a promise to pay your opponent appropriate compensation if it should turn out that the grant of an injunction was not warranted.

You need to act quickly once a potential breach has been discovered, because time will be a relevant consideration for the court in deciding whether your application should succeed. A delay of more than a few days (or possibly a couple of weeks in complex cases) could mean that your request for an injunction is denied.

You may also be able to claim compensation for any financial losses you have sustained, or to account for any profits that they have made at your expense.

But sometimes it can be unclear what exactly has become of your information.

Where you are aware that private information belonging to you has ended up in the hands of a competitor, but you are uncertain about how this occurred, it may be possible for you to apply for a disclosure order against your rival to help identify the culprit.

You may also be able to apply for a search order to help you locate and secure any relevant evidence where you can show that there is a real risk that this might otherwise be destroyed.

The need for specific legal advice on your situation

We have extensive experience in dealing with breach of confidence claims, both through the instigation of court proceeding and via correspondence, negotiation, and professional mediation.

We understand how the rules governing the protection of confidential information and trade secrets work and can provide quick and comprehensive advice on whether a breach has occurred and if so what the appropriate rights of redress may be, based on your circumstances.

We also have particular expertise when it comes to applying for injunctive relief.

If you would like to discuss the content of this article, please contact Jonathan Mortimer in our Dispute Resolution team on 01423 566666 or email jonathan.mortimer@raworths.co.uk

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Published on 22 November 2021