In this resource, we explain what trade secrets are and how you can protect them in Australia.
Have you ever wondered how Google has been able to maintain its competitive edge over other search engines? The success of Google lies in its unique search engine algorithm. Google’s search engine algorithm is one of the most protected trade secrets in the world which has allowed Google to retain its position as the number 1 search engine above all others.
Businesses spend a lot of money developing and protecting their unique products. Imagine, for example that Coca Cola’s secret recipe was released to the public; they would immediately lose their competitive edge. Their “secret sauce” would no longer be a secret.
This is where Intellectual Property Law and Trade Secrets comes in.
WHAT IS A TRADE SECRET?
A trade secret is what makes Coca-Cola more popular than Pepsi. It’s what makes KFC fried chicken Finger Licking Good. The most popular consumer goods in the world have a ‘secret ingredient; something unique and of value used in the production process. This is what id referred to as a trade secret however unlike other forms of intellectual ptoperty, trade secrets are not not registered with IP offices.
Then, you may ask, how are trade secrets protected if they are not registered with IP offices?
HOW TO PROTECT TRADE SECRETS IN AUSTRALIA
As a business owner, it is important to know what legal measures are available to protect your trade secrets. Unlike the way patents and trademarks protect trade secrets are protected by legislation, trade secrets are dealt with under the Common Law. Interestingly, even fortune 500 companies rely on Common Law to protect their trade secrets.
So, how does Common Law protect trade secrets?
RESTRAINTS OF TRADE
Restraints of Trade clauses include a non-poach clause, non-solicitation clause, and non-compete clause:
- Non-poach Clauses: otherwise known as a non-recruitment clause, this clause prevents former employees from “stealing” your workers when they quit.
- Non-solicitation Clauses: This clause prevents employees from appropriating your clients for their own personal gain, especially when they leave.
- Non-compete clause: This clause prevents employees from seeking employment with a competitor. It also prevents your employee from starting a business in the same niche or industry.
To protect your trade secrets, it is crucial to hire an Intellectual Property lawyer to structure your employment agreements (as well as other 3rd part agreements) to ensure these clauses are well drafted. Drafting these clauses requires a level of expertise and experience, especially in the area of intellectual property. If these (or any) clauses are not well prepared and written, the court can dismiss them by deeming them unreasonable or unfair.
It is important to note that any employee will be held liable for a breach of any of these clauses and would likely be subject to punitive damages.
NON-DISCLOSURE AGREEMENTS
As the name suggests, Non-Disclosure Agreements (or, NDA’s) prohibit employees from disclosing trade secrets (and any other confidential information) to unauthorised third parties. Non-disclosure agreements typically contain sensitive information like trade secrets that, if disclosed, could be detrimental to you business and trade.
Note that NDA’s are not limited to employee/employer relations. You can also enter into an NDA with investors, contractors, and business partners. Once parties enter into an NDA, the information contained therein becomes confidential. Businesses operating in start-up ecosystems may also use NDA’s to protect their start-up ideas.
COPYRIGHTS
Copyright is one of the most common forms of intellectual property. It can cover photography, videos, some forms of text, just to mention a few. Above we mentioned that copyrights are registerable with IP offices. Well, by putting your trade secret in writing, it can become a literary work that is registerable and protected by copyright laws. In other words, once you put the trade secrets in writing, it is automatically protected by copyright.
Patents
Since the Council of Venice issued the first patent in 1416, the patent has become an important form of IP protection. Registering your trade secrets as patents can give you a legally recognised right of ownership and protection. It is important to note that patent protection does not last in abeyance. Its life span is determined by the type of patent you chose.
A standard patent lasts for 20 years, while an innovative patent lasts for eight years. Australian Law requires a six-month examination period for an innovative patent before enforcement. Contact IP professionals for more information and valuable tips for patent registration.
These trade secret protection mechanisms mentioned above are the most common form in Australia, but there is another measure businesses can take to protect themselves against trade secret infringements.
Equitable compensation for breach of confidence
The courts of equity have long afforded protection to the disclosure of confidential information by means of the cause of action known as breach of confidence.
Equity acts to prevent the disclosure of information in circumstances where there is a duty of good faith binding the conscience of the confidant of the confidentially communicated information.
In other words, an equitable action for breach of confidence can be instituted against an infringer even when there is no binding contract. This action can also be instituted when the contract is unclear, inaccurate, or ambiguous.
REMEDIES FOR TRADE SECRET INFRINGEMENT
Whether in breach of a contractual obligation or through sheer carelessness, your trade secret may end up stolen. It is not enough to wish or hope no one will steal your trade secret; knowing available remedies is important. Here are known remedies for trade secret infringement.
- Issue a Cease and Desist letter demanding the infringing party to desist from their infringement activities. The letter must be firm and assertive; it should also state the consequences of failure to accede to the demand.
- Consider heading to the court of law: A breach of a trade secret is a civil wrong, enforceable in court. You may want to consult with a litigation lawyer to ensure you receive adequate compensation in damages. Your lawyers will determine whether to seek injunctive relief or ask for damages outrightly. The letter of demand previously discussed will come in handy as evidence of deliberate infringement. As earlier discussed, an equitable action for breach of confidence can also be instituted against the infringer.
Need help with a trade secret infringement?
To stay afloat and ensure the survival of your business, you need to guard and protect your trade secrets. To do that, we highly advise you to hire IP lawyers with strong track records of protecting trade secrets and other forms of IP.
If your trade secrets have already been compromised, you should reach out to one of our business lawyers right away. Our team at Lazarus Legal boasts of some of the most trusted legal advisors and litigators in Australia. And, we would be happy to help you.
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Mark Lazarus
Mark Lazarus, the visionary behind the business and the fresh blood of the Lazarus Legal team, Mark (or Laz as he is often known) owes much of his success to his past experiences. And he’s made it his personal goal to bring that wisdom and formula to the firm.
