Protecting Intellectual Property - Preparing for Competition from Employees and Consultants

Under English law, there is no abstract right to protect businesses from competition from former employees, consultants or anyone else. Businesses have the opportunity set in place contractual obligations on employees and consultants to maximise the legal means to protect intellectual property rights, confidential information and trade secrets against information theft and industrial espionage at the outset, and during the course of the relationship as seniority increases to garner some protection against theft when hired hands set off for greener pastures.

Part I - Prelude

Businesses spend an inordinate period of time and money establishing client relationships during the course of building their business and venturing into new markets and technologies. An inevitable part of that process is engaging trusted people to carry out the work required to generate new revenues, build new technologies and manage the business. These processes create personal human relationships between members of staff and external suppliers and clients.

Courts have always been reluctant to prevent people from working and unreasonably preventing competition by allowing onerous restrictions on employees when they end their relationship. In the case of consultants, the legal obligations owed to the people paying for their services are generally more relaxed.

In the rush to engage skilled staff businesses frequently neglect to safeguard themselves against what might be called unfair competition – establishing relationships and networks on the pocket of the business and then leaving to join or create a competing enterprise. Tensions rise after the employment relationship ends and an employee wishes to use confidential information of their former employer for their own interests even when they compete and conflict with their former employers’. The courts say that ex-employees are permitted to earn a living without unreasonable or unfair restraint upon competition. After an employment contract ends, the legal relationship descends from one of a fiduciary relationship where employees are not permitted to compete with their employer, even during their spare time, to one where a court is reluctant to intervene.

How then is it that companies may properly protect their intellectual property from the outset? Firstly, receiving an assignment of the intellectual property rights in consultancy or freelance arrangements is key. In the case of employment relationships, intellectual property rights are owned by the employing business by default.

It is one thing to try and protect a business by ensuring that it owns the intellectual rights in creative materials, it is quite another to safeguard itself after the employment relationship has ended.