Protecting Trade Secrets - Essay Example

[Lecturer] Details] 21 October 2008 Protecting Trade Secrets: Employee Restraints of Trade When deciding to accept a positionwith a company, regardless of size or stature of that specific company, there may well be restrictive covenants imposed upon the employee by the company concerned. Whether or not the prospective employee agrees with the restrictions is a debate unto itself, however the reasoning behind such restrictions are based upon protection of the company concerned with respect to their clientele and their trade secrets.

A common form of restrictive covenant is termed a restraint of trade, which is generally described in common law as ‘contractual restrictions on freedom to conduct business” ("Restraint of trade." Wikipedia, The Free Encyclopedia). There is reference to ‘reasonable’ in terms of the enforcement of the restraint, with direct bearing upon the protection of the company’s interests, being the clients and trade secrets of that business. The concept of restrictive covenants placed upon an individual has a long history, with legal case references being made as far back as the 17th century where a judgment was passed by Chief Justice Coke that an individual cannot bide himself not to use his trade generally.

In 1711, a legal case; Mitchel v. Reynolds, mention was made in favor of the law, but against free discretion. Thus the law stipulated from these early times, that if a clause of restraint is unreasonable, it can be seen as void. Specifically pertinent to individuals; is a term known as the ‘blue pencil test’ which was defined in a 19th century English case namely, Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd [1894] AC 535, here elements of a contractual agreement can be enforced legally were reasonable, and the portions that had elements of illegality would be stricken from the agreement (via the scratching out of wording with a blue pencil), this would include individual words that make the clause excessively wide.

Having dealt with the a general overview of legal descriptions and definitions of restraints of trade affecting the individual, one has to move on to the subjective viewpoint of the individual that is presented with such a restraint of trade within their offer of employment via their employment contract. Ultimately the individual has to make the decision of accepting or declining the contract, this decision must be made knowing that the restraint can be void if the clauses are worded in a fashion that causes the restraint to be too wide.

However if directly relating to the business or company’s clients or trade secrets and the restraint is reasonable, it will be upheld if challenged within the legal system.It would be deemed as a calculated risk, by the individual concerned, if they operate in a highly specialized or niche market and are presented with such a restraint and therefore careful consideration would be recommended, as this would potentially have a long term effect on the individual’s employment prospects. A more general field of expertise, where the individual may leave the employer’s service and continue in a similar field and function, without jeopardizing the employer’s clients and trade secrets, would not really affect that individual’s future employment prospects and income opportunities.

ReferencesChitty, Joseph. A Practical Treatise on the Law of Contracts Not Under Seal, and Upon theUsual Defences to Action Thereon. London: S. Sweet, 1826."Restraint of trade." Wikipedia, The Free Encyclopedia. 7 Sep 2008, 11:26 UTC. 14 Oct 2008.