You don’t know what you’ve got ‘til it’s gone: protecting your company’s intellectual property assets

Although when writing her smash-hit “Big Yellow Taxi” Joni Mitchell was arguably more concerned with the environment and conservation, the message from her song rings resoundingly clear for many Australian companies and their often unrealised “non-physical” assets: their intellectual property (whether it be a trademark, a patent, a trade secret or copyrighted material) is incredibly valuable, more often than not, insufficiently protected and its loss, potentially catastrophic.

In August 2014 one of the largest banks in the United States of America, JPMorgan Chase & Co (JPMorgan), announced that it had suffered an enormous computer hack which affected the accounts of 76 million families and around seven million small businesses.[1] Sometime later the entry point used by the hackers was allegedly identified – the hackers had managed to steal the login information of a JPMorgan employee.[2]  As JPMorgan only had a “single layer” authentication system on the server in question, rather than requiring its employees to provide some other sort of verification when logging in to the bank’s systems on that server, the hackers were able readily to gain access to data held by the company. 

What does this mean for me and my company?

The JPMorgan case illustrates the fact that even large institutions which spend millions of dollars a year on their security systems ($250 million a year in JPMorgan’s case[3]) can be prone to attack and can have the information held by them accessed by third parties.  In an intellectual property setting, the impact of this kind of breach or any other incidental release of a company’s intellectual property could be devastating, particularly where the intellectual property accessed is central to the company’s products and / or services. 

Australian directors and officers often fail to give adequate attention to the importance of the property that does not always make it on to their balance sheet – such as patents registered for products that are still being developed and trademarks that the company is readily recognised for, trade secrets and confidential information.  All of these kinds of intellectual property have intangible value and a failure to adequately protect property can have substantial financial and reputational costs for a company. 

What do I need to protect?

It is important that company directors and officers understand what intellectual property is held or owned by their organisation and that they have a base working knowledge of how protection of that type of intellectual property operates.  As a starting point, a company may elect to conduct a wide ranging audit of the intellectual property it holds and owns and of the security mechanisms in place to protect that property.  This process should involve considerations such as:

  • What kinds of intellectual property does my company hold?  Where and how is that intellectual property stored?
  • Does that intellectual property need to be registered?  Who owns the intellectual property held by my company?
  • What security policies and mechanisms do we have in place?
  • Do the staff have security training and understand the security mechanisms in place to protect that information?  Are there agreements in place to prevent employees who leave the company from using or exploiting that intellectual property?
  • Are any contractors or third party service providers able to access or use that intellectual property?

Once directors have an understanding of the kinds of information and/or intellectual property held by them, they can start to use their “intellectual property catalogue” to identify which types of intellectual property can be registered (if they have not already been registered), what levels of protection need to be applied to that information and what extra steps can be taken to protect that information.  These kinds of reviews should be undertaken on an annual or bi-annual basis, so that systems and policies are updated where necessary.

What can I do to protect my company’s intellectual property?

1                  Put confidentiality and employment agreements in place

Many of your company’s employees and/or contractors will be involved in the development, use and marketing of your company’s intellectual property or the products and services that make use of your company’s intellectual property.  In order to ensure that your company’s intellectual property is not sold to another company or used to develop a competitor product, you need to ensure that your company has confidentiality agreements in place or clauses in its employee’s employment agreements to restrict and/or prevent their use and disclosure of that intellectual property – particularly when they leave your company.

These kinds of agreements can be used to agree the terms of any use and disclosure of the information the employee has helped to develop and/or has had access to and to ensure that  that there is written evidence of the agreement.

2                   Educate your company’s staff and officers

As highlighted by the JPMorgan story – sometimes data breaches can occur because of innocent mistakes made by employees.  It is important that your company’s employees understand the nature and value of any intellectual property they have helped to develop or that they make use of, that they understand the technological and security mechanisms in place to protect that information and how to use those mechanisms effectively and appropriately. 

3                  Develop internal intellectual property and security strategies and policies

How your company chooses to manage and protect its intellectual property will largely turn on the value of that intellectual property to your company.  By having an ongoing intellectual property strategy in place your company can ensure that its intellectual property is managed effectively from the point of its inception to the point of its day to day use.  This could involve:

  • Assessing what kinds of protections may be applied to a form of intellectual property when it is first being cultivated – whether it is protection as a trade secret, protection via a patent, a trademark or some other form of protection such as a contract.
  • Having in place clear terms of employment contracts to cover ownership of intellectual property.
  • Determining who should have access to that intellectual property – whether it should be all of your employees, those who are developing or manufacturing the products or services that use the intellectual property and/or any contractors engaged to work with or market that product or service,.
  • Entering into agreements with any applicable third parties responsible for promoting or distributing your products or services.
  • Developing security systems that are appropriate for the type of intellectual property in question.

Lavan Legal comment

Part of any director and/or company officer’s role is to manage and protect that company’s assets successfully and this includes managing that company’s intellectual property.  Boards need to take an active role in assessing the value of their company’s intellectual property, developing mechanisms to protect and conserve that information and to maximise the profit that can be derived from that intellectual property.

At the end of the day the key questions to be considered are:

  • What would be the potential loss to my company if its intellectual property was breached and/or lost?
  • What is the value to any company of this asset?


[1] http://www.theguardian.com/business/2014/oct/02/jp-morgan-76m-households-affected-data-breach

[2] http://dealbook.nytimes.com/2014/12/22/entry-point-of-jpmorgan-data-breach-is-identified/?_r=0

[3] http://dealbook.nytimes.com/2014/12/22/entry-point-of-jpmorgan-data-breach-is-identified/?_r=0

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.