The confidentiality of commercially valuable information.

• Author: Bowal, Peter
• Position: Employment Law

Introduction: the Cymbal Business

In an age when multi-billion dollar companies struggle to survive, a small family-owned company called Zidjian continues to manufacture cymbals as it has for almost four hundred years. It controls almost 65% of the world's cymbal market, with annual revenues close to $50 million. The formula of the special alloy used to manufacture these cymbals is even kept from family members until their trust is earned. (1) If the Zidjians had protection for the alloy formula through a patent, that protection would have expired and their business viability would have been lost long ago.

The protection the Canadian legal system can offer through intellectual property (copyright, patent, trademark and industrial design law) is limited in scope and time. Businesses mightily relying on valuable information may be better off doing what the Zidjians did: protect that information from disclosure through their own efforts.

Risk of Unauthorized Employee Disclosure and Mis-Use

Commercially valuable information must be carefully protected today. Employees collectively represent one of the greatest risks to unauthorized disclosure of valuable information. Inadvertent disclosure, such as accidentally leaving a memory stick at an off-site meeting, can be planned for and mitigated to some extent by appropriate training and embedded locks. Deliberate disclosure is best prevented by meticulously selecting and monitoring employees and limiting their access to sensitive information. The main protective legal instrument is the employer --employee confidentiality agreement. Ultimately, however, once valuable information has been improperly disclosed, it is impossible to get it back. It is very difficult practically to limit its further dissemination, even with an injunction, or to receive adequate compensation for the disclosure. The best approach is prevention.

Today's highly competitive business environment encourages employees to continuously seek better rewards for their skills by moving between jobs and companies, often in the same industry and geographical area. This adds to the challenge of protecting confidential information because employees are often hired for what they know. Organizations bleed information with each employee who resigns to take a job with a competitor.

As with the breach of contracts in general, the remedies sought for breach of confidentiality may be an injunction to stop further exploitation of the confidential...