How is information to be "jealously guarded" so that it is confidential or a trade secret?

Some factors taken into account by an Australian Court include:

• the extent to which the secret is known by the employees and others involved in the employer's business;
• the extent of measures taken by the employer to guard the secrecy of the information;
• the ease or difficulty with which the information could be properly acquired or duplicated by others.

Although these guidelines are general and each case will turn on its own facts, the message to businesses is clear: unless a business is serious about maintaining the confidentiality of its trade secrets, and takes active and adequate steps, the information may not qualify as a trade secret.

The measures which should be taken by a business will depend very much on the type of business and information that is to be kept confidential. Obviously, the measures that are needed in a large organisation, with a large number of employees, are likely to be more extensive and complicated than those for small businesses.

Some very brief "throw-away" suggestions are that a business should:

• have an express and published policy for confidentiality of information and provide training to make the policy effective;
• require employees and persons having access to confidential information to sign confidentiality agreements;
• mark documents as "Confidential";
• avoid copying confidential documents (physically or electronically) unnecessarily;
• maintain a record of confidential documents (including copies) and information;
• warn employees and contractors, and explain the need to retain confidentiality, and the consequences of failure;
• maintain security, including physical possession and security, and electronic passwords, virus protection and other expedients such as separate databases and computers for sensitive information;
• implement a security incident reporting and response system;
• conduct audits of files of high risk employees or others, and random audits to ascertain compliance with any confidentiality policies and any information that has been disclosed electronically;
• check and be selective about information revealed to the public through marketing materials and trade shows etc;
• obtain specialist security or IT advice about the appropriate methods of protection;
• obtain legal advice and a review of documents and confidentiality agreements.

These are only a few of the practical expedients which could be appropriate. The best protection for trade secrets may be to develop a culture of awareness of the need to preserve confidentiality and to minimise the risk of inadvertent or deliberate loss.

This story is available in full at Mondaq.