Ralph Kroman, protection plans

Have you done enough to protect your trade secrets?

By Mark Borkowski

Saturday, June 24, 2006

The recent case between Air Canada and WestJet demonstrates that a company may go to great lengths to acquire the confidential information of a competitor. When dealing with confidential information, the age-old adage applies: "an ounce of prevention is worth a pound of cure". An expert in this legal area is Ralph Kroman, a partner of the Toronto based law firm of WeirFoulds, LLP. Despite what they may think, the transportation industry has lots of trade secrete and know how. Management possess many routes and techniques unknown to their competitors.

Kroman has advised many clients "employees who have access to confidential information should sign agreements which contain appropriate confidentiality clauses. The courts will enforce non-solicitation and non-competition clauses under appropriate circumstances." The agreement should be drafted to contain provisions, which are appropriate so that a court will not frown upon them. Many companies have signed confidentiality agreements in their files but often they overlook the important of employee entrance and exit interviews.

During an entrance interview, each new employee should be reminded of his or her obligations regarding the company's confidential information. The information, which the company considers confidential, must be clearly identified to the employee. A company policy regarding confidential information should be reviewed with the employee and a receipt obtained from the employee.

A wise employer also tells the employee during the initial interview that the employee must not disclose confidential information of former employers. The agreement, which is signed by the employee, should contain a guarantee to this effect. Recent legal cases have shown that, if an employer turns a blind eye to the disclosure of confidential information of a third party to it, the directors and officers of the employer may be held personally liable.

It is imperative that employees who depart employment are given proper exit interviews where their legal obligations regarding confidential information are explained. Employees will likely be more reluctant to disclose confidential information to a new employer if they know that the former employer is serious about protecting its interests. It should be confirmed by the employee that no copies of confidential information remains in the hands of the employee, and the employee's passwords should be de-activated.

If the former employee will be employed with a competitor under suspicious circumstances, an appropriate letter should be sent to the new employer. This letter does not need to be adversarial but is intended to put the new employer "on notice" that the new employer must not use confidential information disclosed to it.

Relationships with independent contractors and consultants can be soft spots for companies with confidential information. The general rule is that, unless there is an agreement to the contrary, independent contractors own all of the deliverables. This issue has resulted in a great deal of litigation, which could be avoided by appropriate language in an independent contractor agreement.

One of the best ways to protect confidential information is with a "confidential stamp" which is placed on each page of an electronic or hard copy of a document. The stamp is most effective if it includes the name of the owner of the confidential information, states that copying is not permitted without the express or consent of the owner, and confirms that the document and all copies of the document are the sole property of the owner. Kroman has seen it all. He is a resident expert on this subject and consults to the industry.

On the whole, it is important for a company to recognize that protecting confidential information is not simply a matter of adopting a "cookie cutter" approach. A protection plan should be customized to reflect the type of information and the commercial realities of the business. Unfortunately, many companies do not focus upon a plan until after it is too late.