In 2019, two senior executives of a Bangalore-based IT company were arrested for allegedly stealing data from their employer’s company and using it for their own company. They accessed the company’s client list and used it for their own benefit. Upon further investigation by the company’s operations team, it was found that it was Intellectual Property (IP) that was stolen and the money diverted. In Navigators Logistics Ltd v. Kashif Qureshi & Ors., the court held in favour of the employees saying that the former employers cannot restrain them from using their customer list.
Today, most businesses are facing the threat of IP theft or leakage by the their members such as employees and even consultants. Intellectual Property (IP) is a valuable asset for any organization not just due to its market value, but also the amount of money and effort which goes in to create it. Due to its intangible nature, IP is easy to misappropriate & leakage of IP may happen due to inappropriate disclosure by employees, lack of safety measures or weak policies and agreements.
In this article, the term “IP leakage” refers to a situation where the IP of an organization is made available or accessible to third parties in a wrongful manner, causing a monetary or reputational harm to the organization. The term IP here includes registered and non-registered IP, technical and business information which is sensitive and confidential in nature.
For the organizations, identification and sealing of IP leakage points is necessary to realise the long term value of IP. Top 10 strategies to prevent IP leakage are listed below:
- Figure out what is the IP in your organization
The first step to avoid IP leakage is to identify what is the IP in your organization and what its potential value for the business is. Without taking stock of existing IP and knowing the nature of IP, one will not be able to devise appropriate strategies to safeguard it. Typically in an organization, the IP is in the form of software codes, proprietary products, designs, new inventions, new products, business plans, know-how, confidential information etc. Once the IP is catagorised, one may figure out the ways to safeguard it.
- Stringent Agreements with confidentiality clause
While transacting with external consultants, vendors, customers, employees where there is going to be an exchange of IP, one must execute an NDA (Non-Disclosure Agreement) to ensure the IP is safeguarded. Important documents such as NDAs, Service Agreements, MOUs, etc. must be reviewed by a legal expert to ensure that the clauses of such agreements sufficiently and appropriately cover the range of IP the organization possesses along with the knowledge of relevant governing laws, arbitration, return of confidential clause, indemnity and liability.
- IP Policy
IP Policy along with an active IP committee may be extremely helpful in implementing right processes in an organization to handle IP. The IP Policy shall have clauses related to confidentiality and security of the information.
- IP Sensitization programs
Periodic IP sensitization programs by internal or external speakers may play a vital role for the employees, firstly, to understand their roles and responsibilities with respect the safeguarding the IP of the company and secondly, to understand the risk they can impose on the current employer if they bring and use IP of their previous employer.
- Physical security of the documents and files
Important documents and files should be segregated as highly confidential or moderately confidential based on their nature. All documents of confidential nature shall be labelled as “Confidential” and soft files shall have the word “Confidential” as header or footer.
- Restricting access
Some areas in the organization where secret trials, experiments or research are being conducted, should be restricted and only limited number of people should be permitted to enter such areas. Having CCTV camera or restriction to use smart phones may further be helpful.
- Registering IP
Wherever possible, IP should be registered in the form of copyright, patent, design because registration is a very effective way of safeguarding IP. The certificate of registration obtained from the Government can serve as evidence of ownership of IP. Once IP is registered, one can disclose it to others without a fear of losing it.
- Exit interviews and induction for new joiners
When employees leave the organization, they take a lot of IP of the company with them in the form of experience and know-how. An exit interview to remind them of their responsibilities, liabilities and the agreements undertaken by them is a very effective step to safeguard IP of the company. Similarly, an induction program for the newcomers focussed on dangers of misappropriating previous employer’s IP plays an important role in sensitising newcomers about the guidelines and processes of handling IP.
- IP audit
An annual IP audit is immensely useful in identifying any gaps in the IP processes adopted by the company. Audit also helps to take stock of existing IP, check their status to docket upcoming official timelines.
- Using software to track transfer of data or information
Nowadays, there are many software technologies available in the market which may be used to track the transfer of data from electronic devices thereby helping in protecting the company’s IP.
Leakage of IP in an organisation may be detrimental to the business and hence special care has to be taken by the organisation to deal with such situations. Strategies that need to be adopted to safeguard IP may vary depending on the kind of business jurisdiction, but a few basic principles as stated above are simple steps that an organisation must adopt to safeguard their IP and prevent leakage to avoid any damages or losses.
Authors: Bindu Sharma (Origiin IP Solutions LLP), Bhavya Sharma (Jindal Global Law School)
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