Protection of intellectual property and trade secrets

How to prevent employees' and partners' misappropriation of a company's intellectual property and trade secrets – and what can be done if misappropriations nevertheless occur?

Challenges

Intellectual property rights (IPR) and trade secrets are the most valuable assets in many businesses

Intellectual property includes trade secrets and IPRs such as patents and trademarks.

Effective protection of intellectual property and trade secrets is crucial to secure a company's competitive advantage. Mobility in the job market and various collaboration arrangements pose a risk of misappropriation of intellectual property and trade secrets.

Some typical scenarios

A salesperson leaves and takes his/her former employer's customer list to a competitor and attempts to "poach" clients.

A developer who has knowledge of all technical information in a company leaves the company and establishes a competing business.

A company engages consultants who have access to technical information while also working for competitors.

Three entrepreneurs establish a technology company where they develop technical solutions. One of the founders, who played a crucial role in the development, leaves to start a competing business offering similar technology.

Thommessen has extensive experience and solid interdisciplinary expertise in protecting intellectual property and trade secrets and safeguarding a company's assets in case of suspected breaches.

Preventive measures

Intellectual property rights

Include clauses in agreements with employees, consultants, and collaborators that ensure the company's ownership of all intellectual property rights developed on its behalf.
Register intellectual property rights where possible: patents, trademarks, and designs.

Trade secrets

Identify all information that the company possesses, which is developed on its behalf and can provide a competitive advantage, and which therefore should be kept confidential.

Internal protection measures

Establish internal procedures for handling information containing trade secrets: How the information should be marked and stored, access restrictions, requirements for using specific systems to access the information, etc.
Include confidentiality clauses in agreements (NDA) with employees who have access to trade secrets, including that trade secrets cannot be used for purposes other than performing tasks for the employer.
Monitoring employees' use of IT systems to ensure information security.

External protection measures

When sharing information with external parties etc.

Limit sharing with third parties to what is strictly necessary.
Sharing with third parties should be approved by a responsible person within the company in each case.
Always require the third party to sign a confidentiality agreement prior to sharing any information, specifying that the information should be treated as confidential and used solely for the specified purposes outlined in the agreement.

Measures related to employees and others

Non-compete and non-solicitation clauses for employees, shareholders and partners are important practical tools for protecting the company's intellectual property rights and trade secrets.
Liquidated damages for breaches of relevant obligations for effective enforcement.
Declaration of compliance with confidentiality and loyalty obligations can be required from employees who are transitioning to a competitor.
Unilateral imposition of garden leave or modified job responsibilities during the notice period.
Suspension and termination of employment may be necessary measures to prevent (further) misappropriation.
The link between employment and ownership of shares: If employees also own shares in the company, it is essential to regulate within a shareholders' agreement procedures that will follow in the event of a material breach and to establish efficient mechanisms for the transfer of shares from the defaulting party.

Enforcement measures

What can be done when there is suspicion of misappropriation of intellectual property?

Access to emails and other electronically stored materials can help uncover evidence of misappropriation of the company's intellectual property.
Misappropriation of intellectual property will often constitute a criminal offense, and one may consider filing a report to the police.
Make the competing company aware of the suspicion of breach and potential joint liability.
Legal action may be necessary to protect intellectual property. Interim measures such as preliminary injunctions or arrest can be an effective way to stop the misappropriation of intellectual property and trade secrets.
Often, the damage has already been done and one is left with a claim for compensation or royalties for the use of the intellectual property or trade secrets. In such cases, difficult questions may arise regarding evidence and calculation of damages.