The Inside Job: Can Employees Walk Out The Door With Your Company's IP?

With the economic downturn forcing redundancies, most employers are aware that the Q1 period brings an increase in employee movement. But have employers considered how much value could be walking out the door when an employee leaves? In today’s “knowledge economy”, businesses increasingly understand the value of intangible assets in the form of information.  Yet few businesses give thought to how and where those assets reside, or consider how much can be lost or passed to a competitor when employees move on. 

The ease with which knowledge can be taken by employees has increased exponentially in recent times.  USB drives are now large enough to store literally millions of documents and cloud computing can provide limitless secure storage.  The increase in remote working also allows employees to download your documents and information in the privacy of their own homes.

There is also a growing international market for transferable knowledge, making the temptation even greater for employees to maximise their value to their new employer.  Emerging economies, with different laws, regulations, and cultural values, provide a ready market into which intellectual capital can be dispersed.

This issue affects every industry.  A number of high profile cases in the United States and China have seen former employees jailed for theft of trade secrets relating to consumer electronics and financial trading software, but every business has a wealth of internal knowledge that is used to give it a competitive advantage over its rivals.  Business plans, presentations, strategies, customer lists, market positioning, and protocols and procedures are all valuable assets that can find their way to new employers. 

Most worryingly, this movement of information is not confined to “rogue” employees.  Many salespeople will claim that their address books of contacts belong to them, not to their employer.  Each type and level of employee and each type of business is likely to have a different understanding of what belongs to the company.  In addition, international cultural differences play an enormous role in determining where employees perceive the boundary to be between legitimate and illicit use of information.

So, how do you distinguish between what an employee is free to take away and what should remain with the business before it’s too late?  What procedures should be in place to maximise the intangible value retained by the business when employees move?  To what extent do data protection and privacy laws permit monitoring of employees’ activities?  What procedures are available when employees are suspected of taking valuable information and/or passing it to competitors?

In 2012, McDermott will be running a number of IP- and employment-focused seminars to provide an overview of how intellectual property and employment laws can help your company to protect it, and the policies and procedures that can be used to mitigate value walking out the door.