A former Qantas pilot has recently settled a Federal Court case after admitting he copied thousands of sensitive commercial documents before joining rival Virgin Australia. When he admitted to copying and retaining confidential company data, the media referred to it as “espionage.” You can read more here.
What is corporate espionage?
Corporate espionage, in its simplest form, is the unauthorised taking, use or disclosure of confidential business information. It most often happens from the inside due to an employee, contractor, or executive who have access to confidential information through their role.
Some examples of this in action are client lists emailed to a personal account, strategy documents downloaded before resignation, or pricing models copied. Even if the information is never sold or shared, the act of taking it can create serious legal risk.
In Australia, there is no single offence called “corporate espionage”. Instead, the conduct is dealt with through well-established areas of commercial law when it comes to:
- Breach of contract
- Breach of confidence
- Breach of fiduciary duty
- Misleading or dishonest conduct
- And occasionally, criminal law.
So, what is confidential information?
Confidential information is information that isn’t public, has commercial value, and is shared on the understanding it won’t be misused.
It doesn’t need to be labelled “confidential” to be protected. Courts look at what the information is, how valuable it is, and whether it was treated as private.
If the information gives a business an advantage because others don’t have it, the law is likely to protect it, especially if the information is not public, has commercial value, and is treated as confidential by the business.
Senior employees and executives face even higher standards. Directors and fiduciaries owe ongoing duties not to misuse information gained through their position. Courts take it seriously when “pre-departure planning” constitutes data harvesting.
Are trade secrets the same as confidential information?
Not quite.
Trade secrets are a subset of confidential information, the most sensitive and valuable kind. They’re the information a business depends on to stay competitive, and they’re usually known by very few people and tightly controlled.
All trade secrets are confidential information. Not all confidential information is a trade secret.
The more critical the information, and the more effort a business takes to protect it, the more likely a court is to treat it as a trade secret and to intervene quickly if it’s misused.
Check out our blog article What are Trade Secrets? for further reading.
Conduct and the intent behind it
What makes conduct look like “espionage” rather than a routine employment dispute is intent and scale, and the more deliberate the conduct, the more serious the consequences are.
For businesses, there are other risks involved once confidential information has been leaked including, but not limited to, the loss of competitive advantage, expensive litigation, and reputational damage.
What can businesses do?
Prevention matters more than reaction and some steps a business can take are:
- Clear confidentiality clauses
- Carefully drafted employment contracts
- Access controls
- Exit protocols
- And of course, legal advice.
