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HR legal guide to protecting your company’s intellectual property

Workplace Relations & Safety
Man at computer

How can organisations promote creativity and innovation while managing their legal risks and protecting their intellectual property?

Companies that are in the business of bringing new products and ideas to market will know that creating something valuable also means creating something possibly worth taking, copying or misappropriating.

Great ideas are worth sharing. But it’s important that an organisation’s confidential information and intellectual property (IP) don’t fall into the wrong hands.

Drafting appropriate terms in written employment and contractor agreements, creating sound HR and IT policies, and understanding your rights to IP ownership are all actions a business can take to protect its ideas and confidential information ─ while maintaining an innovative and creative culture.

1. Oversharing on social media

An employee proudly posting on LinkedIn about the latest project they’ve been involved in at work can be a great marketing tool if it’s done with prior approval. However, posting without permission can create issues for your company, clients and business partners.

In general, employees owe their employers a duty not to disclose or misuse confidential information that they obtain during the course of their employment. Employers can obtain injunctions to stop employees or former employees from revealing anything that should be kept under wraps. However, it’s important to discern between confidential information and general know-how.

Employees and former employees may not always understand the difference between advertising their skills and knowledge on social media, and revealing their employer’s intellectual property or confidential information.

In the recent case of Maverick Biomaterials v Abouelkheir, a former employee shared a LinkedIn post of a preview of an electronic visual he had developed, with promotional material claiming that the product would assist businesses in gaining a “competitive advantage within the [relevant] field”.

His former employer claimed that the promotional material contained IP and confidential information obtained by the former employee during his employment. The Federal Court granted an interlocutory injunction that the former employee be restrained from continuing to display a preview of his product on his LinkedIn account, among other things.

In light of this, it is recommended that employers draft appropriate contractual provisions for both employees and independent contractors in regard to sharing confidential information on their social channels.

Another way to mitigate online blunders is to implement a sound social media policy and ensure that workers read and understand it.

The case of Linfox Australia v Stutsel, while dealing with offensive Facebook posts rather than those revealing confidential company information, is also a useful reference point for how social media policies can be instrumental in the outcome of an unfair dismissal case.

2. BYOD, IT and cybersecurity

Companies may provide their employees with the IT they need to perform their role, or have a Bring Your Own Device policy in place.

In both cases, correct implementation is needed to mitigate the very real risks to the security of a business’s intellectual property, sensitive client information and, of course, finances, if the wrong person gains access to a device.

Major risk factors include employees saving information to their devices locally, using their own personal devices without an employer’s consent, and taking a lax approach to password protection.

All of this can result in project, client or financial details being exposed if the device is left in a public place, lost or stolen.

Employees may also be sharing their personal or work-provided device with other members of their household when not using it for work, which increases the risk of exposure to malware on the device and ultimately the company’s network.

An organisation’s BYOD and IT policies should therefore be carefully crafted to address expectations and consequences relating to:

  • access to the device
  • cybersecurity measures
  • liability for repairs and updates
  • creation of and password protection of user profiles
  • reporting lost or stolen devices
  • ownership of company data and applications
  • privacy and the potential for company internal audits (if any)
  • procedures to follow prior to an employee leaving the business.

Employers could also consider implementing a workplace surveillance policy. This should cover the reconnaissance that an employer may undertake in relation to its IT systems and cybersecurity. It’s important to note that laws regarding workplace surveillance vary from state to state, and there may be privacy implications under the federal Privacy Act.

3. Restraints of trade

Employees are generally entitled to take the skills and ‘know-how’ they gain in a role to their next place of employment.

However, in order to prevent employees from using these skills to compete with their former employer, work with their former employer’s clients or poach their talent, employers can apply ‘restraint of trade’ clauses.

Restraints of trade should be reasonably necessary in their objective and scope to protect a legitimate business interest, and not be contrary to public policy.

This is not a one-size-fits-all exercise, and requires careful consideration. In the recent New South Wales Supreme Court case of Harden v Willis, a company’s two-year restraint was found to be unreasonable based on factors including the outgoing executive’s age, and the time needed to find his replacement.

This was in spite of the fact that the executive’s seniority and longstanding position with his former employer had exposed him to a multitude of confidential information.

Placing outgoing employees on ‘gardening leave’ can prevent them from spending their notice period downloading, emailing or even memorising your confidential information for use in their new job. Essentially, it means the employee remains ’employed’, but is removed from participation in the workplace, including its IT systems.

Placing an employee on gardening leave first requires an express term in the employment agreement. Employers will also need to ensure the employee is truly placed on gardening leave and not simply removed from client contact ─ a factor also explored in Harden v Willis.

4. Ownership of intellectual property

What happens when a particularly innovative team member claims ownership over something created in your workplace?

Ownership of rights to intellectual property created at work can depend on many factors, including:

  • What any relevant employment agreement or policy states about the ownership of the intellectual property
  • The type of relationship between the ‘creator’ of the property and the employer
  • The specific role and seniority of the creator
  • The nature of the industry
  • The type of intellectual property involved
  • The hours in which the innovation occurred

If an employee’s bright idea or new invention comes about in the course of their duties, during work hours and using their employer’s materials, the employee generally becomes a ‘trustee’ of that invention for their employer and, as set out in the case of Victoria University of Technology v Wilson, is “bound to give the benefit of any such discovery or invention to [their] employer”.

However, the question of IP ownership is not always as simple as determining whether the creator is an employee or not.

In the case of University of Western Australia v Gray, the Court held that an academic had no implied contractual duty to invent in his various roles with the university and, as a result, the medical technologies he invented while working for his employer belonged to him.

Different ownership rights may also apply to independent contractors and consultants.

With all this in mind, employers should:

  • Be certain as to the nature of the relationship of all workers. The recent High Court decisions in Jamsek and Personnel Contracting underscored the importance of precise contract drafting when engaging employees or contractors; and
  • Ensure that contract terms about the creation of new knowledge are clearly drafted. For example, what happens if a contractor presents three solutions to a brief and your company accepts only one? Who owns the other options?

Companies should take proactive measures to protect the fruits of their innovation from misuse by employees, whether current or former, and outsiders. In the case of confidential information and IP, the rights and obligations of the parties should be clearly spelled out in in the employment or engagement documentation and make clear the circumstances that give rise to employer ownership.

You don’t want your company’s million-dollar idea to be making someone else millions.

This article is part of a regular series for HRM Online and was originally published on 2 August 2022.

Photo by Studio Republic on Unsplash.

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

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Meredith Oliver

Meredith Oliver