AUSTRALIA Trends and Developments Contributed by: John Lee, Siabon Seet, Vanessa Farago-Diener and Irini Lantis, Gilbert + Tobin
Strategies for protecting trade secrets in the AI age The rapid development and uptake of AI by business - es in Australia, including generative AI tools such as ChatGPT, poses an interesting challenge for the pro - tection of trade secrets and other confidential infor - mation, given AI’s ability to analyse, learn and deci - pher complex patterns and data sets. As mentioned above, the Australian government released Australia’s first National AI Plan in early December 2025, focusing on encouraging AI invest - ment and adoption whilst mitigating and managing risk. Of the three overarching goals in the Plan, Goal 2 (Spreading the Benefits) is directed to scaling AI adoption, including lifting workforce skills through expanded training access and embedding AI in gov - ernment operations via secure, sovereign platforms. As employees become increasingly reliant on AI tools in their day-to-day work, the risk increases that con - fidential information will be disclosed to, and used or exposed by, the AI tool or its provider. For example, an employee may inadvertently input confidential infor - mation of their employer (or their employer’s clients) into public AI systems that retain the information and use it to further train the underlying model. Further risk arises given documented instances where generative AI tools appear to have memorised aspects of their training data and regenerated those inputs in near- identical form for other users. A recent article in the mainstream Australian media reported that a large professional services firm has directed partners and staff to stop uploading confi - dential data into ChatGPT and other public AI plat - forms, directing them to use internal tools instead to avoid risking “the leak of private information”. To manage the associated risks to trade secrets and confidential information, businesses can implement a number of measures, including: • internal trade-secret protection and AI-use policies – companies should have in place robust poli - cies to protect their trade secrets and confidential information, including specific guidance regarding approved and prohibited AI tools, and as to the
provide even greater certainty and protection for the employer, employment agreements will often contain express covenants from the employee not to compete with, or work for a competitor of, the employer for a period of time after the employment relationship ends (known as a “restraint of trade”). Over and above continuing confidentiality obligations, these types of restrictive covenants reduce the risk that the employee will use secret information of their former employer, because the employee will not be in a position where such use is advantageous (for the duration of the restraint, at least). Significantly, the Australian government announced proposed reforms to employee restraints in the 2025– 26 Federal Budget, delivered in March 2025, including bans on non-compete clauses for those earning less than the high-income threshold (currently AUD183,100 per year) and on “no-poach” agreements. With the Albanese government re-elected in May 2025, it has followed up on its election promise by commencing consultation in July 2025 about the proposed reforms. In particular, the consultation paper is requesting feedback about the proposed ban on non-compete clauses for low- and middle-income workers, and also about other potential reforms in respect of which it was undecided – including non-compete clauses for high-income employees, non-solicitation clauses for clients and co-workers, and broader changes to clar - ify how the doctrine of restraint of trade should apply. While the rationale for the proposed ban on employee non-compete clauses is to facilitate the movement of workers to boost wages and enable skills growth, it does pose a challenge to the legitimate interest of employers in protecting their confidential information and goodwill through reasonable post-employment restraints. The outcome of the 2025 consultation remains pending, but the intention still appears to be for the reforms to come into force in 2027. Accordingly, it will be even more important for busi - nesses to bolster other mechanisms to protect their confidential information, including strengthening con - fidentiality and IP clauses in employment agreements, internal policies, operational protections, and employ - ee offboarding procedures.
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