How to protect your IP being stolen by your employees

Initially you would feel shock…then once that had passed, rage and an immense desire to bring the perpetrators to justice... and then regret that you didn’t install a burglar alarm.

You get exactly the same feelings when an employee steals your intellectual property and sets up in competition down the road.

My employees would never do that!

It is the same with a business’s intellectual property. If you leave your IP totally unprotected the most innocent of employee will see no wrong in using that property for their own gain to set up in competition. The chances are that they were partly responsible for creating that IP, so in their own minds they can justify the theft. It is then a small jump to walking out the door with your most valuable assets.

That is, unless you very clearly tell them that it is yours and mustn’t be stolen.

How to protect your IP

• Non competition clause – this is the clause which protects you from employees working for your competition whilst they are still employed by you. Clearly, if an employee holds a concurrent job with your competition then the risk of IP passing hands is very great.
• Confidentiality clause – the law only offers limited protection to employers from unauthorised disclosure of confidentiality. However, it is possible to strengthen that protection by drafting a tighter clause in your employment agreement.
• Protection of Intellectual Property Clause – this clause spells out who owns any IP created by the employee during the employment and puts in place a procedure for ensuring that ownership of that IP is registered in the name of your business.
• Non solicitation clause – this type of clause prevents your employees stealing your clients or other employees when they leave your employment. Your client base is probably your most valuable asset alongside your employees. Both assets deserve a special clause to protect them in your employment agreement.
• Restraint of trade clause – sometimes you will need greater protection than all the above clauses can offer. It that is the case then a restraint of trade clause is the way to go. What this says is that an ex employee cannot work for a competitor after leaving your employment. Such clauses are usually limited by a time period or a geographical locale. Such clauses can be combined with a long notice period and an ability for you to require that the employee not come not work during the notice period (“a garden leave clause”) for added protection.

Does your employment agreement have all of these clauses and are you sure they adequately protect your interests?

Do I need all these clauses?

Contract clauses are the same. The type of clause you need will depend on how sensitive the information is you want to protect and the type of employee who has access to it.

For example, an office administrator may have access to sensitive information indirectly through his work but may pose a low risk of setting up in competition to you or passing on information. In that case you may decide that only the following clauses are necessary:

• Non competition
• Confidentiality

A person employed in research and development however poses a greater risk. You may want the following in this case:

• Non competition
• Confidentiality
• Protection of Intellectual Property
• Restraint of trade

For a sales person with regular access to your client base you would include all the above plus a non solicitation clause.

Why they need to be well drafted

1. To keep intruders out – the deterrent effect;
2. To catch the culprits.

Your contract clauses must do both too. They must be worded sufficiently well not only to stop the opportunistic thief but also to hold up in court should you ever want to enforce them.

There are a number of laws surrounding protection of IP and what you can and cannot say – for example, all restraint of trade clauses must be reasonable. If your clauses fall foul of the law they may act as a deterrent to the ignorant employee but certainly won’t hold up in court.

But I don’t have that many secrets

Don’t invest in cheap contract clauses

• Non competition clause
• Confidentiality clause
• Protection of Intellectual Property Clause
• Non solicitation clause
• Restraint of trade clause

Carry out an audit of your agreements now to see whether you are properly protected.

© Michael Smyth. Would you like to use this article in your newsletter, on your website or in your magazine? If so, I would be happy to give you permission. Simply click here to find out how you can use this article