A firm´s legal control over confidential information. A study on proactive management of trade secrets and post-employment obligations in an employment contract

Abstract

Driven by an extreme pace of technological advancement, firms in the intellectualized economy are participants in an unprecedented race to innovate. To succeed in the business arena, firms must be smart in their approach to innovate in order to capture and control the very innovations that define them. However, procedures to capture and control confidential information that innovation activities have resulted in are often overlooked despite the immense value for firms. Moreover, the growth in confidential information subsequently leads to more value attributed to employees that are the catalyst behind confidential information. Although, former employees are perceived as the biggest threat to misappropriation of confidential information.

During the employment confidential information is protected by the employee's implicit duty of loyalty, and confidential information that fulfils the legal definition of a trade secret attains protection from the Trade Secrets Act , during and after employment. However, the protection requires that the firm manages the information in line with the legal definition. Although, after an employee has terminated the employment, the employee is no longer bound by the implicit duty of loyalty, and the protection retrieved from the Trade Secrets Act is reduced. To extend the employees' duty of loyalty and enhance the protection retrieved from the Trade Secrets Act, the employer can oblige the employee with contractual obligations not to use or disclose trade secrets that the firm possesses. Although, the regulatory landscape for contractual post-employment obligations is diverse and technically complex.

This thesis examines the legal frame for trade secrets, non-competition obligations and non-disclosure obligations in an employment contract can be utilized to manage and control confidential information. Moreover, to illustrate the interplay between the legal framework and management a fictitious case has been applied to contextualize the findings of this thesis.