Protecting Confidential Information: Are You Giving Away Your Trade Secrets?

Author:Mr Sandy Donaldson and Madeleine Crawford
Profession:Donaldson Walsh
 
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Trade secrets, whether technical information, like designs or a formula, or commercial, like customer lists or business procedures, can be valuable assets, perhaps the most valuable assets, of a business.

The risk of illegal use or loss of trade secrets has never been so high. And with the continuing development of technology, this risk is increasing. In our digital world, information is now easier to access, disseminate and store, so trade secrets are also easier to steal, or to simply be disclosed so that they are no longer secret.

Loss of information could be as a result of a deliberate appropriation or use by an employee, or some other person with access, or by a "hacker", or it could simply arise because the information "leaks".

With electronic storage and communication of information via email etc, this is now extremely easy, and often difficult to detect. As well as electronic transmission, the enormous volume of information that can be stored on the hard disk of a laptop computer can be simply and easily physically removed with the computer.

A "trade secret" is a form of confidential information, but the expression does not yet have a settled meaning at law.1

There are a number of factors to be considered in determining whether information is confidential information, or a trade secret. The factors, originally consolidated by Robert Dean in The Law of Trade Secrets and Personal Secrets, (2002, 2nd ed), have recently been quoted by the New South Wales Court of Appeal in Del Casale & Ors v Artedomus (Aust.) Pty Limited [2007] NSW CA 172 [Del Casale]. In that case, Hodgson JA commented that "...the stronger these factors are in any particular case, the more likely it is that the particular information will be treated as a trade secret that [an] employee is not entitled to divulge..."

NEED TO GUARD SECRETS

One of the factors quoted in Del Casale is the extent of measures taken to guard the secrecy of the information. The question then becomes, to what extent does the information have to be protected before it can be considered a trade secret? It has been said that for information to be a trade secret it must be "jealously guarded".2

In the United States of America, a regime for the protection of trade secrets is set down in the Uniform Trade Secrets Act3. In order to be afforded the protection of the Act, the subject information must be "the subject of efforts that are reasonable under the circumstances to maintain its secrecy" (the...

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