AUSTRALIA Law and Practice Contributed by: John Lee, Siabon Seet, Vanessa Farago-Diener and Irini Lantis, Gilbert + Tobin
breach of fiduciary duty and (if the employer was a corporation) breach of the Corporations Act will also apply. 1.13 Other Legal Theories Claims in relation to trade secrets can be commenced in Australia where there is use or threatened use of the trade secret without consent. A number of trade secret cases commenced each year in Australia relate to employee misappropriation of trade secrets whereby the employer commences proceedings to recover its trade secrets and stop any potential use by the former employee. In addition to claims against a former employee, including for breach of employment contract, a third party may be liable in relation to a breach if they are deemed to have knowledge of it. Australian courts have held that the following will satisfy the knowledge limb: • actual knowledge; • wilful blindness; • wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; and • knowledge of circumstances which would indicate the facts to an honest and reasonable person. Additionally, a third party may be liable for induce - ment for breach of contract. In Australia, this involves a defendant inducing another person to break a con - tract with the plaintiff. In order to make out a case for inducement for breach of contract, the plaintiff must show that the defendant procured or induced the breach of contract and that there is proof of the damage caused by the inducement ( Daebo Shipping Company Ltd v The Ship Go Star (2012), 207 FCR 220). 1.14 Criminal Liability Misappropriation of trade secrets are pursued as civil claims in either the Federal Court or the Supreme Court of the relevant state or territory. An exception is where the misappropriation of the trade secrets is by a director or other officer or employee
of a corporation who has used their position to obtain the information, and the use of the trade secrets has a dishonesty element, such that there has been a likely breach of Section 184 of the Corporations Act, or where the misappropriation of trade secrets involves a foreign government principal under the Criminal Code Act 1995 (the Code). If found guilty of either offence, the court can impose a maximum penalty of up to 15 years imprisonment. 1.15 Extraterritoriality Generally, any misappropriation must be within Aus - tralia in order for a trade secret owner to bring a claim under Australian law. There are, however, discrete instances where a claim can be brought in Australia. This includes, for exam - ple, if a claim: • is against a company that is carrying on business in Australia; or • is against an individual whose employment con - tract has a choice of jurisdiction or against a company whose contractual arrangements include a choice of jurisdiction that includes Australia. 2. Misappropriation of Trade Secrets 2.1 The Definition of Misappropriation In order to make out a claim of trade secret misappro - priation, the owner of the trade secret must show that there has been, or is threatened to be, an authorised use or disclosure of the information which causes det - riment to it ( Smith Kline and French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health (1989), FCA 556). It is not necessary for the owner of the trade secret to show that the defendant gained access through unlawful means in order to commence proceedings. 2.2 Employee Relationships The implied obligations in an employment contract are an important legal duty that protects employers from misconduct of employees. An employee will be in breach of their fiduciary duties if they engage in activities which are incompatible with the fulfilment of
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