Spies, lies and thieves: Stopping IP theft

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Corporate espionage can be financially and strategically devastating for employers, so having preventative measures in place is crucial to the safekeeping of company secrets.

In the case of BlueScope Steel, alleged theft of highly sensitive and commercially valuable company secrets by a disgruntled former employee has seen the Australian steel maker seek an urgent appeal to the Federal Court in an attempt to retrieve and destroy trade secrets before this information reaches competitors.

BlueScope alleges that long-serving BlueScope software development manager Chinnari Sridevi "Sri" Somanchi downloaded around 40 gigabytes of company documents over a four-year period, including downloading a number of highly sensitive software codes just moments before her redundancy meeting in June 2015.

Blair Scotland, partner at Dundas Street employment lawyers, says companies can avoid lengthy legal battles and loss of commercially sensitive information by ensuring basic protections are in place.

“Allowing someone to plug in a thumb drive and steal all your confidential information suggests big lapses in security,” Scotland says.

“If this information was so important that the employer was prepared to spend tens or thousands of dollars fighting through the courts, why couldn’t they put in place some basic protections to prevent this information being stolen,” Scotland says.

He says employers can put a range of basic protections in place, including practical data such as firewalls and ensuring documents are only accessible by certain people. 

“It’s definitely better to spend the money on protecting your information than spending hundreds and thousands on legal fees afterwards,” Dundas says, noting that it only takes moments for a disillusioned employee to steal vast amounts of commercially sensitive information using a portable USB drive or email account.

Employers can also fine tune employment agreements to give themselves extra protection, including post-employment provisions such as restraints of trade to prevent an employee going to work for a competitor or stealing former clients, Dundas says.

“Good clauses in employment agreements around confidentiality, intellectual property, conflict of interest and external obligations can all be beefed up by having specific terms and conditions in your employment agreement providing those protections,” he says.

“However, people who are hell-bent on doing your wrong won’t hold an employment agreement in high regard,” Dundas cautions.

All employees have obligations of fidelity to their employment, including the duty to act in their employer’s best interest and breaches can result in criminal charges as well as being sued for damages.

“Employers do have rights that they can pursue through the courts if an employee takes away information that they are not entitled to,” Dundas says.

He says if the employer is able to quantify the loss as a result of the employee’s breaches, then they are able to seek this in damages. 

In BlueScope’s case, management considered the stolen company secrets of enough financial importance to warrant launching emergency legal action in the Federal Court of Australia and Singapore, where the former employee is now based, to stop the information falling into the hands of its competitors.

However general manager of BlueScope’s building components Mark Crimmins told reporters that while BlueScope was likely to launch proceedings in Australia alleging breach of employment contract, it was not seeking damages because ". . . payment of damages will not make BlueScope's confidential information confidential again once it has been disclosed to one or more competitors".