Much has been made in the press recently about theft of personal data but confidential data stolen from your business can also cause untold damage. Most employees are not unscrupulous; but a small minority are and will not hesitate to steal confidential information belonging to your business and use it for their own benefit, regardless of the damage it may cause.

Sarah Birkbeck of ACID Accredited law firm DMH Stallard recently worked on a case which highlighted just how much damage this type of action could potentially have done, had the employer not acted swiftly to put a stop to it.

Case History

John had worked for a successful recruitment agency for several years but had no written contract of employment, they had just never got around to formalising the paperwork. The agency’s biggest asset was its database costing thousands to which John had access. John had become unhappy and, unbeknown to his bosses, plotted to set up in competition, using confidential information and copying a large part of the database giving him the unfair advantage of the agency’s assets to damage the agency.

John didn’t realise that even though he had no formal contract he was subject to implied duties. (e.g. to act at all times towards the employer with good faith and fidelity and implied duties of confidentiality). Employers can rely on the law to protect confidential information if obtained during the course of employment. It must not be in the public domain but may be protected if it could be of advantage to a trade rival.

Following John’s resignation, a routine check of his computer post-termination revealed system and data irregularities. The agency acted quickly. John’s new business was traced and forensic experts were drafted in and provided persuasive evidence. A powerful court order was obtained resulting in the discovery of memory sticks containing the agency’s database at John’s new premises. In light of the overwhelming case against him, the matter settled shortly thereafter and John’s new business was held to account for profits as a result of the misuse of the confidential information. John was forbidden from using the unlawfully obtained data, at risk of being sent to prison for breaching the court order.

Confidential information is an extremely important business asset . Investing in its protection should be “a no-brainer”!

A few things to remember:

Ensure there are properly drafted employment or service contracts which address the issue of ownership of intellectual property rights and confidential information, the boundaries of use and the return of information/documentation/property upon termination.

Confirm the position with regards to ownership of IP rights, which is that (with some specific exceptions) in the absence of any agreement to the contrary, works created during the course of employment belong to the employer. Spelling out what you expect the position to be focuses the employees’ mind and should make it easier to pursue infringement/breach.

Ensure that all employees value and will protect your intellectual property rights.

Make it clear that access to confidential information is a privilege at an appropriately senior level with sufficient safeguards.

Do not leave confidential documents lying around or fail to pass-word protect them.

Ensure your policy includes proper exit management, and that all property belonging to the business whether in soft or hard copy is returned and signed for prior to the employee leaving. Then check (but do not potentially corrupt by trying to investigate further) the contents of laptops, blackberries, mobile phones to confirm that all is as it should be!

If you uncover anything unusual seek expert advice immediately. Tackling potential damage sooner gives the legal team a better chance of recovery.

And finally on a more positive note data stolen through electronic means by an employee is likely to be traced. Partly this is because the methods used are often surprisingly unsophisticated emails sent to a hotmail account with client lists attached are not unusual. But even for the more “sophisticated” offenders – covering tracks is difficult when experts have access to the sort of technology used by police to investigate the most serious sorts of crimes like internet child pornography .


Sarah Birkbeck of DMH Stallard


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