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Suing Former Employee for Breach of Confidentiality

In Hong Kong, intellectual property rights can be divided into the following 6 categories: –

Design rights;
Passing off; and
Right to Confidential Information.
The above 1, 2 and 3 require registration before they can be obtained, on the contrary, articles 4, 5 and 6 do not require registration, but only require the owner to provide the required evidence to own the right and (if necessary) sue the infringer. For example, if the owner can preserve and provide drawings and copyright information (such as the date of creation and publication date), he can own the relevant copyright to prevent infringers from dealing with the infringing products. However, what the author wants to talk about in this article is the “right to confidential information” which has been rarely discussed.

In the process of business operations, some confidential information will unavoidably be generated, and it is difficult to prevent that some employees will know the existence of confidential information. Therefore, the common law emerged to protect the employer’s right to confidential information. This right means that the employee has the responsibility to ensure that confidential information is not disclosed and is not known and used by unauthorized persons. The employee’s responsibilities continue whether the employee is still employed or has resigned.

Although the common law has granted employers the “right to confidentiality”, the author still recommends that employers clearly list the “right to confidentiality” through employee contracts. More importantly, explicitly state the definition of “confidential information”. Depending on the needs of the enterprise, the author further recommends that the following content be included in the definition of “confidential information”: –

“Customer Information” and “Supplier Information”

The above two types of confidential information are very practical. It is common to see former employees using customer information to contact customers after leaving the company, and offering low-priced services to steal the employer ‘s customers. With clear and unambiguous liability, it is easier and faster for employers to win lawsuits.

If the employer has started to use or collaborate with others to open a new company and use confidential information, when the employee is still underemployment (usually a few months before the employee leaves the company), the employer should also check the information on the former employee’s computer and use public “director search” records to find more evidence to prove premeditation and intent. This will be of great help in applying for a “temporary restraining order” (see below).

In addition, former employees may still have ” informants ” within the employer’s company. If the employer does not take action in a timely manner, these ” informants ” may also have the opportunity to participate in the former employees’ connections and provide more confidential information and customer information to the former employees. Therefore, employers must be proactive and cautious.

Commonly, employers would receive request for price reduction from customers shortly after a former employee leaves the company. It was only then that the employer realized something was wrong. If you discover that a former employee has “back stabbed” you or the company, you must not sit idly by and ignore it.

The employer may sue the employee or even the company for aiding and abetting the former employee’s breach of confidentiality. Through litigation, the employer can apply to the court for the following orders: –

Restraining Order – Prohibit former employees or related persons from using confidential information,
Delivery Order – The former employee surrenders all documents containing confidential information to the former employer,
Disclosure Order – The former employee discloses in the form of an affidavit all transactions in breach of confidentiality along with documentary evidence,
Damages Order, and
Costs Order.
Under special circumstances (for example, the losses suffered by the employer are irreparable with money), the employer may even consider applying to the court for a “temporary injunction”. If the application for a “temporary injunction” is applicable, the employer can quickly obtain a “temporary injunction” (within one or two weeks after the lawsuit is filed), which will immediately terminate the former employee and the defendant’s continued use of confidential information.

If the former employee or the defendant violates the “temporary injunction order”, the employer can even apply to the court for “contempt of court”. In serious cases, the former employee or the defendant may be jailed. For businesses, a “temporary injunction” can also be announced to customers. Once informed, customers will no longer patronize the former employee/defendant. This way, employers can retain customers.

If an employer considers litigation to be part of running a business, he may also use litigation to prevent businesses between former employee and customers and thus restore the employer’s relationship with his customers. The likely reason why a former employee misappropriated confidential information must be to gain customers or business from his former employer. Therefore, employers should act decisively and take action as soon as possible after discovering that former employees have stolen business to avoid serious losses of customers and business.

Benny Kong & Tsai © 2023

Benny Kong & Tsai, Solicitors

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