Protecting your business’s intellectual property and confidential information

7 April, 2015
by: Cripps Pemberton Greenish

It is important that companies ensure they have adequate protections in place with their employees and consultants dealing with ownership of any IP rights generated on their behalf.


What is intellectual property?

Intellectual Property (“IP”) is intangible property created by virtue of intellectual effort which can have both moral and commercial value. There are various types of IP rights which protect creative works, whether through trademarks or design rights (both registered and unregistered), patents or copyright.


Does IP created by employees automatically belong to the employer?

In broad terms yes and no. The creation of IP in the workplace (for example, when an employee creates a new product or process or develops a company’s brand), under UK law IP which is created in the course of an employee’s normal employment duties, the rights automatically vest in the company. That said, employees developing rights outside of their normal duties arguably, may not be owned by the company. If the protection of IP is a particular concern, companies should ensure there are comprehensive provisions dealing with the ownership of IP rights in their contracts of employment and contracts for services. The contractual protection should be tailored depending on the level of creative input an employee is likely to have to make sure there is adequate protection in place. Where copyright is concerned, it is important to obtain the author’s waiver of any moral rights which may exist in the works they have created. We would advise employers to review such clauses if an employee’s role changes or they are promoted as a higher level of protection may be required.


What protection exists for an employer in relation to confidential information?

IP rights also extend to confidential information and know-how. Employers are reasonably well protected from the misuse of their confidential information and know-how by employees during their employment due to the implied duties of confidence imposed on employees. That said, to ensure there is no doubt over what information is confidential employers should, as a matter of good practice, highlight when information is confidential by labelling it clearly and imposing a contractual obligation of confidentiality both during and after employment. It is worth noting that an employee’s implied duty of fidelity during employment prevents an employee from disclosing trade secrets both during and after the termination of their employment. Employers will of course be required to prove that the information constitutes a trade secret and not just confidential information. It is therefore advisable, as with confidential information, to clearly label such material as being a trade secret.


Employers should include wording within their employment contracts requiring employees to return and/or delete all confidential information on termination of their employment or at any time if requested by the company. This should include both the return of physical documents and anything which the employee may have stored electronically. It is helpful to define what the employer considers to be confidential information, which can be done in relatively broad terms such as customer lists.


It is helpful for employers to include a garden leave provision within their employment contracts for employees highly exposed to the company’s confidential information. A garden leave provision allows the employer to pay the employee their full salary and contractual benefits but the employee is not required to attend work or carry out their duties. The ability to place an employee on garden leave, gives the employer the ability to distance the employee from the company’s confidential information and know-how and stops them going immediately to a competitor with that knowledge.


Another way of protecting your business is to have well drafted restrictive covenants in place.


Copyright infringement and the right to monitor

Employers should give consideration to the material which their employees are accessing online. Copyright may be infringed where employees have downloaded material from the internet. Software may also be downloaded by employees and software licences may also be infringed if unlicensed software is installed. To protect against this, employers should have in place some form of IT and Electronic Communications Policy which specifies that such activity is prohibited on the company’s systems.


If a company suspects that an employee is inappropriately using its confidential information and know-how, it may want to monitor that employee’s activity on its electronic systems. If an employer wishes to do this, there should be an express term within the employment contract enabling it to do so. The provision within the contract should advise the employee that they have no expectation of privacy whilst using the company’s electronic systems and that their activities may be monitored as and when required by the company.


What action can you take?

If an employer considers that its IP rights have been infringed, they should seek legal advice quickly as there are steps that can be taken to limit the damage. It is however advisable not to delay in taking action and collecting as much information as possible to evidence any breaches as that will assist any court action that may be taken.


To protect itself, an employer can apply to the courts for an injunction to prevent the employee/former employee from breaching/further breaching the covenant. In some cases, a company may require immediate relief and it can apply for an interlocutory injunction on that basis. The court can grant such an injunction to prevent any breaches taking place before the case reaches a full trial. The company can also apply for damages for breach of contract from the employee/former employee. Such damages will be assessed on the loss suffered by the company as a result of the employee’s/former employee’s breaches. Court action is however expensive and so prevention and well drafted contracts are advisable.