By Nick Blackbourn
Unlike more formal, definable intellectual property such as trademarks and patents which must go through rigorous, detailed, registration processes and are therefore easier to grasp, one little understood nebulous form of ‘IP’ is referred to as ‘know how’. This can be defined as:
‘Information, skill or expertise (for example, processes, methods, techniques, drawings, data or compilation) that is generally confidential’
It may be recorded in some written form and/or just contained in people’s minds or memories and is generally only protectable in law by enforcing a duty of confidence. Again, this (which can be in written form in a contract or just communicated at the time the information was made known in the first place).
This information may be hard to define but can be hugely valuable to a business and extremely damaging if ever misused or leaked. The most famous example is probably the Coca Cola recipe – allegedly only known to two employees who must never travel together and whose identities themselves are secret because it is of such huge value.
During my years of working in the food and drink sector, and especially when dealing with the sale or acquisition of businesses, the measures taken to protect such important information always came under the spotlight. Covering recipes, ingredients, sourcing, production techniques, suppliers, customers and pricing for example, all of which can instantly be seen by anyone in this sector as this information is crucial in making the difference between commercial success and failure.
Cautionary tales
A couple of examples where this became highly sensitive…
Spilling beans
A consultant had been engaged to carry out a study for a food company into its confidential pricing structure. The consultant was then discovered, through press agents, to be on the verge of disclosing highly sensitive information to the national press. Any resulting commercial and political pressure would have been highly damaging to the business, and it was necessary to work very quickly.
From gaining knowledge of his intent, to gathering the necessary evidence, lining up and instructing a barrister to go in front of a judge to apply for a court injunction to stop this happening took approximately four hours! The consultant was then contacted and warned that, if he continued, an injunction ignored could mean imprisonment. As a result, he backed off.
Taking more than the Mickey
The Managing Director and factory manager of a business that had been sold were discovered to have been planning to set up a rival business nearby, with the co-operation of existing customers who felt uncomfortable being approached. Visitor books from reception showed the dates and times of visits and individuals gave evidence of what had been offered. Before the business was sold, I had advised management to ensure their contracts were properly tied down but was told, “You do the legals, we’ll do the commercial stuff, we’re all gentlemen here.”
They were discovered to have stolen recipe information, pricing and customer lists as well as poaching key staff. An expensive ‘Mareva’ injunction was obtained allowing a raid by bailiffs simultaneously on homes, cars and business premises in the early hours and we recovered trunk loads of evidence. This limited future activities, but some damage was already done and couldn’t be stopped – estimated at a loss of c£300k per year of profit. I wondered whether this was ‘legals’ or ‘commercials’- I think the answer is obvious.
So, what can be done to protect your business?
The good news is that steps can be taken, the courts do have teeth and can act quickly, but first:
- Identify your commercially sensitive IP.
- If it’s in the form of know-how, identify where it lies.
- Review contracts with employees, third party suppliers and customers to ensure they protect the business, or if you have none, put them in place (a legal requirement with employees in any event).
- Without making employees fearful, ensure they are aware of the sensitivities and the genuine ability and intent to act should there be breach.
As the old adage says, and as can be seen from the examples, prevention is better than cure (and cheaper)!!
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If you’re interested in our support to audit the Intellectual Property in your business, and identify and protect your assets including know-how, contact us on 020 3056 8538 or info@thelegaldirector.co.uk.
