Your former employee just got a plum job – but she has your trade secrets!
That is the nightmare that publicly listed Australian steel company, BlueScope Steel, faced in 2015 when it uncovered a massive, four-year-long effort by a former software development manager to steal nearly 40 gigabytes of its deepest trade secrets and intellectual properties – with the high probability she would use it at her new job in Singapore. In their sworn statement as part of their international lawsuit in both Australia and Singapore, the company said that if the former employee had succeeded with her theft, it would have cost the company nearly US$45 million dollars in annual turnover.
If one company could have encountered such a nightmare, have you ever really given it much thought about how protected your trade secrets are?
What are trade secrets, and how are they protected in Singapore law?
A trade secret, or confidential information, is basically a piece of information that is unique, and of high value to a company. Such information is not generally known to the public, nor does it exist in the public domain. Whether a piece of information is considered confidential or a trade secret depends on the factual circumstances relating to that information. For instance, the secret recipe for Kentucky Fried Chicken, or the recipe for Coca-Cola can be considered as trade secrets. Even your company’s financial affairs, business operations, or client list would be classified as a trade secret.
While there is no single codified law in Singapore that is specifically written for trade secrets, under general law or under express contract terms, a person who has someone else’s confidential information is legally obliged to keep the information secret without disclosing it to third parties. If the person discloses the information without prior approval or authorisation, then the person is considered to have breached obligations of confidentiality and is liable to legal action.
Generally, the Courts will consider three elements when deciding if the legal action against the person is warranted and necessary:
- Whether the information had a necessary quality of confidentiality;
- Whether the information was imparted in circumstances importing an obligation of confidentiality; and
- Whether the information was used improperly without authorisation and caused detriment to the company.
There may also be overlaps between the confidential information and other intellectual property laws like copyright and trade marks. For instance, if the confidential information is also copyrighted material, then the copyright owner may have legal recourse in the law of copyright against the infringing party.
I suspect my employee has stolen confidential information from me. What kind of claims can I apply for?
Generally, you can ask the Courts to grant you:
- A Court order for the former employee to deliver up all the infringing materials which contain the confidential information and/or to destroy all such materials;
- An injunction against, that is a Court order prohibiting, the employee from further wrongful use or disclosure of the confidential information;
- Monetary damages; and/or
- An account of the profits, that is to disclose the amount of profits made and pay to the claimant such amount, derived from the theft of the confidential information.
For instance, in the case of BlueScope Steel, they sought a Court Order preventing the ex-employee from passing on the information to anyone else, and ordering her to hand over all computer equipment and storage devices for their forensic examination.
Yikes! I’m pretty worried about my company’s trade secrets now. What can I do to protect it?
Intellectual Property of Singapore (IPOS) recommends a three-pronged approach to protecting your trade secrets:
- Control and limit physical and electronic access – ensure that only certain employees have access to such information (e.g. top management executives);
- Keep clear records – Record down all business transactions that contain confidential information, and clearly mark out which information is supposed to be confidential;
- Implement or augment and consistently apply Confidentiality or Non-Disclosure Agreements – these are contracts that ensure that a person (e.g. your employee, contractor, supplier, and any other external party) is legally bound to keep all information confidential; this has been shown to be an effective way to reinforce and prevent trade secret theft.
Other methods of protecting your information include:
- Inserting confidentiality clauses in employment contracts;
- Conduct regular trainings for employees and vendors who may have access to confidential info. This is to make it very clear to employees and vendors what is expected of each of them when they deal with information confidential to the company;
- Tighten your IT systems to prevent unauthorised access;
- Separate strategic information into separate silos, so nobody except you has a clear view of your trade secrets;
- Monitor employees’ email and computer use from time to time;
- Check an exiting employee’s work computer and email accounts before and immediately after their last day of work.
However, even if you have forgotten to include a confidentiality clause in your employee’s contracts, don’t worry! Employees have a general obligation not to disclose company secrets even if this is not expressly stipulated in the contract. If any breach has been suspected, employers should act immediately to take legal advice and consider seeking the necessary court orders to protect their interests as delays in such matters can be costly.
Speak to Ronald about Employment Law
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This article is written by Ronald Wong from Covenant Chambers LLC and edited by Tang Chee Seng from Asia Law Network.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.
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