The law provides protection of trade secrets. Generally, a trade secret is information that is not generally known to the public and that has some commercial value.

To be a trade secret, the information must be secret. But absolute secrecy is not required. For example, if the information has been published somewhere, but this is not generally known to the relevant businesses in Australia, the information could still be protectable as a trade secret.

Generally, there are three ways in which the law can protect secret or non-public information:

• by statute;

• by contract; and

• by an obligation arising under the law or in equity.

Trade secret protection can last for an indefinite period.

Legal confidentiality issues arise frequently in business, including:

• Where an employee leaves a business. What information can the employee use in the new job?

• When a business is sold. In order to protect the buyer from unfair competition, the seller's use of confidential information is usually restricted.

• Where technology is being used in a joint venture or partnership. The owner of the technology will frequently seek to protect the value of the technology (regardless of whether or not it is protected by other intellectual property (IP) rights) by using the protection afforded to trade secrets.

See Protection of trade secrets.

If an employee possesses confidential information or knowledge gained at the employer’s expense, the employee has a duty to maintain its secrecy. But not all information that an employee has access to is protectable.

The kinds of information that an employee may obtain in the course of employment have been classified as follows:

• information which is so easily accessible by the public, trivial or unimportant, that it is not regarded by the courts as confidential;

• information which, once learned, remains in the employee’s memory and becomes part of the employee’s skill and knowledge; and

• trade secrets, comprising information of a highly confidential nature.

One of the most common disputes in this area of law involves an employee leaving the business and joining a competitor or setting up a business in competition with the former employer. Often, there is an allegation that the employee took trade secrets and is using them to compete with the former employer.

In these circumstances, obligations of confidence could arise in three ways:

• in a written agreement;

• under s 183 of the Corporations Act 2001 (Cth); and/or

• under the equitable principles dealing with breach of confidence.

However, the situation with independent contractors is more complex, and it is recommend that proper written agreements be used with contractors to ensure that trade secret information is properly protected.

See Employees and contractors.

Legal action can be brought for trade secret misappropriation. The cause of action relied upon depends on the circumstances. Often, the cause of action is breach of contract or seeking equitable relief under the principles dealing with breach of confidence.

One challenge of a trade secret case is that the trade secret alleged to have been misappropriated must be identified with particularity. This is to ensure that the subject matter of the case is not, in fact, generally known to the public. However, at the commencement of the case, it may be uncertain exactly what has been misappropriated.

There are defences to trade secret actions, including:

• The information was independently developed without use of the confidential information.

• The information is generally known to the public, and is therefore not secret.

• The information is merely general skill and knowledge.

• The information is trivial.

See Trade secret litigation.