Elon Musk, the embattled CEO of Twitter is threatening to sue Meta, headed by Mark Zukerberg. Mr Musk alleges that Meta used Twitter's trade secrets and intellectual property (IP) to build Threads as well as hiring dozens of ex-Twitter employees.

We need to emphasise that this article discusses the law in England and Wales. American law is quite different, and it is beyond the scope (and perhaps usefulness) of this piece. In England and Wales, an employer can attempt to protect confidential information and trade secrets by having employees sign a restrictive covenant. They can also include a confidentiality clause within the company's employment contracts.

WHAT IS A RESTRICTIVE COVENANT IN AN EMPLOYMENT CONTRACT?

A restrictive covenant is a term in an employment contract that can restrict a former employee's conduct after they have left your business. There are several types of restrictive covenants, including non-compete, non-solicitation, non-dealing, and non-poaching covenant.

IS A RESTRICTIVE COVENANT LEGALLY ENFORCEABLE?

If a claim to enforce a restrictive covenant is brought before the Court, it must have regard to the doctrine of restraint of trade. This principle states that people should be free to follow their trade and use their skills without undue interference.?

Any contractual term restricting an employee's activities after termination is?void for being in restraint of trade?and contrary to public policy,?unless?the employer can show that:

  • It has a legitimate ownership interest that it is appropriate to protect.
  • The protection sought is no more than is reasonable having regard to the interests of the parties and the public interest.

? The Court applies the following key principles in assessing and enforcing post-termination restrictive covenants:

  • To be enforceable, a restrictive covenant must be designed to protect a genuine ownership interest of the employer.?
  • Post-termination restraints are enforceable if they are reasonable, having regard to the interests of the parties and the public interest. The question of reasonableness is at the point when the covenant was entered into, not in the light of subsequent events.
  • Restrictive covenants having the sole aim of preventing competition are never upheld by the Court. A non-competition restriction must be designed to protect the employer's confidential information, trade secrets, or customer connections, and prevent the employee from obtaining an unfair advantage.
  • Restrictions must be no wider than necessary.?

Essentially, the Courts will not uphold a restrictive covenant that merely prevents an employee from accepting a position with a competitor or opening their own business in competition with their former employer. For it to be enforceable, there must be an advantage or asset that the employer aims to protect, for example, a client list, key staff members, or a particular innovation that makes their product or service unique.

HOW CAN A COMPANY PROTECT CONFIDENTIAL INFORMATION AND TRADE SECRETS?

A letter sent by Alex Spiro, an outside lawyer for Mr Musk, alleges that Meta engaged in "systematic, wilful, and unlawful misappropriation of Twitter's trade secrets and other intellectual property."

An employment restrictive covenant can include restrictions on using confidential information and/or trade secrets. Such clauses can also be incorporated into commercial agreements with third parties that require access to information to undertake work assigned to them.

In addition to express clauses, all employment contracts contain an implied term that the?employee?will serve their employer with good faith and fidelity whilst in employment.

When it comes to confidential information and trade secrets, employees have a duty of good faith and fidelity whilst in employment not to disclose such information to third parties or use it for their own gain.

CONCLUSION

Whether Elon Musk will actually launch a legal claim against Meta is debatable. He is known for threatening legal action but not following through. It would be surprising if Mr Zuckerberg's extensive legal team had not run a risk assessment for potential lawsuits before employing ex-Twitter staff.

In 2020, the British Government sent out a consultation concerning a proposal to introduce a three month statutory limit on the length of non-compete clauses. As at the time of writing, there has been no Government response to the consultation findings.

, the best way to protect your organisation's trade secrets after an employee has left your employment is to impose a restrictive covenant that has been reviewed by an Employment Law Solicitor to ensure it will hold up in Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.