Battle between airlines shows technology has made corporate espionage easier than ever
The Hollywood version of corporate espionage is pretty much dead. Dark-clothed crooks sneaking in and swiping information is a distant memory for most organizations.
Proprietary information isn’t kept in a basement archive. It’s sitting in a data file, online, being accessed legitimately by employees around the world via the Internet. Confidential information can flow instantly, and knows no geographic or time-sensitive boundaries.
Because of the Internet’s speed and accessibility, employers are increasingly threatened with the loss of key information, particularly with disloyal employees. Such is the case in the present $220-million lawsuit between Air Canada and WestJet.
Air Canada alleges WestJet and two of its employees — one a former Air Canada worker and the other former WestJet vice-president and co-founder Mark Hill — improperly accessed an employee website which contained confidential information used by former and current Air Canada employees pertaining to passenger bookings.
Hill resigned from WestJet in July after Air Canada launched its lawsuit.
Air Canada alleges that between May 2003 and March 2004 an employee’s identification number was used 243,000 times to access route and market information on Air Canada’s private website.
Air Canada hired a private investigator to rummage through the garbage and recycling bins of Hill. The investigator found shredded documents relating to Air Canada and to Jetsgo’s flight load data. Jetsgo, another discount airline in competition with WestJet and Air Canada, just announced a $50-million lawsuit of its own against WestJet in the wake of the discovery of the documents.
Load data is an industry measure of how much of an airline’s seating capacity is used during a given period. It is proprietary information of Air Canada and highly confidential, only accessible by its employees. If accessed by a competitor, it allows the competitor to review the airline’s most profitable route and compete against that route.
WestJet has counter-claimed, alleging Air Canada’s investigator trespassed by taking the shredded documents from Hill’s recycling container.
Since it is still before the courts, the outcome of the lawsuit is far from clear. But it raises a very important issue which employers increasingly face: How to protect confidential information from leaving the company, given the ease with which information is transmitted in today’s technologically driven society?
Computerized records are not as secure as paper systems and use a substantially smaller number of people to maintain record systems of equal size to paper systems. Such reduced numbers may increase a system’s vulnerability. In addition, the ease with which databases are created and information shared, the ease of access to a large number of records because of the density of storage and the ease with which copies of records can be made are other problems faced as a result of the Internet.
While this is not an easy issue to address there are some steps an employer can take in order to protect itself from this type of corporate espionage.
Restrictive covenants and employment contracts
Restrictive covenants typically appear in the form of non-solicitation, non-competition or confidentiality clauses found within an employment contract. Non-solicitation clauses prevent the employee from soliciting either employees or customers of the employer for a fixed period of time. Non-compete clauses restrict the employee’s ability to compete, or assist others to compete, for a fixed term.
Confidentiality clauses are used by employers to protect goodwill, trade secrets, formulae, software programs and similar confidential information from leaving the company and causing significant damage.
These types of covenants are used to ensure an employee does not steal proprietary information and enhance his own value by trading it to a competitive employer. If this occurs, employers may attempt to enforce restrictive covenants by way of injunctions. But winning an injunction in court can be tough, and it’s a time-intensive and cost-consuming process. By the time the case goes to court, the information is typically used to the competitor’s advantage. Therefore employers need to think of other means by which they can stop the transmission of corporate information.
Golden handcuffs
Golden handcuffs are surprisingly effective methods by which an employer may stop corporate espionage. Golden handcuffs are used in executive employment contracts to ensure the employee adheres to the agreement. Examples of golden handcuffs include stock options, share participation, retention bonuses and pension top-ups.
Golden handcuffs may be tied to a strong restrictive covenant, so that if the covenant is breached the negative consequences outlined in the golden handcuffs apply.
The employment contract must be drafted to ensure that maintaining the monetary “carrot” is linked to not breaching the covenant. Ultimately it may cause the departing employee to think twice about committing the crime, as he stands to lose a significant amount of his compensation.
Technological safeguards
Physically, employers should have technological barriers that block information from being accessed or transferred. Such tools may include passwords, encryption and firewalls. If the organization can develop controls by using security clearances and limiting access to information on a need-to-know basis, these types of safeguards will assist to protect proprietary information.
Natalie MacDonald is an associate with Grosman, Grosman & Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected].
Proprietary information isn’t kept in a basement archive. It’s sitting in a data file, online, being accessed legitimately by employees around the world via the Internet. Confidential information can flow instantly, and knows no geographic or time-sensitive boundaries.
Because of the Internet’s speed and accessibility, employers are increasingly threatened with the loss of key information, particularly with disloyal employees. Such is the case in the present $220-million lawsuit between Air Canada and WestJet.
Air Canada alleges WestJet and two of its employees — one a former Air Canada worker and the other former WestJet vice-president and co-founder Mark Hill — improperly accessed an employee website which contained confidential information used by former and current Air Canada employees pertaining to passenger bookings.
Hill resigned from WestJet in July after Air Canada launched its lawsuit.
Air Canada alleges that between May 2003 and March 2004 an employee’s identification number was used 243,000 times to access route and market information on Air Canada’s private website.
Air Canada hired a private investigator to rummage through the garbage and recycling bins of Hill. The investigator found shredded documents relating to Air Canada and to Jetsgo’s flight load data. Jetsgo, another discount airline in competition with WestJet and Air Canada, just announced a $50-million lawsuit of its own against WestJet in the wake of the discovery of the documents.
Load data is an industry measure of how much of an airline’s seating capacity is used during a given period. It is proprietary information of Air Canada and highly confidential, only accessible by its employees. If accessed by a competitor, it allows the competitor to review the airline’s most profitable route and compete against that route.
WestJet has counter-claimed, alleging Air Canada’s investigator trespassed by taking the shredded documents from Hill’s recycling container.
Since it is still before the courts, the outcome of the lawsuit is far from clear. But it raises a very important issue which employers increasingly face: How to protect confidential information from leaving the company, given the ease with which information is transmitted in today’s technologically driven society?
Computerized records are not as secure as paper systems and use a substantially smaller number of people to maintain record systems of equal size to paper systems. Such reduced numbers may increase a system’s vulnerability. In addition, the ease with which databases are created and information shared, the ease of access to a large number of records because of the density of storage and the ease with which copies of records can be made are other problems faced as a result of the Internet.
While this is not an easy issue to address there are some steps an employer can take in order to protect itself from this type of corporate espionage.
Restrictive covenants and employment contracts
Restrictive covenants typically appear in the form of non-solicitation, non-competition or confidentiality clauses found within an employment contract. Non-solicitation clauses prevent the employee from soliciting either employees or customers of the employer for a fixed period of time. Non-compete clauses restrict the employee’s ability to compete, or assist others to compete, for a fixed term.
Confidentiality clauses are used by employers to protect goodwill, trade secrets, formulae, software programs and similar confidential information from leaving the company and causing significant damage.
These types of covenants are used to ensure an employee does not steal proprietary information and enhance his own value by trading it to a competitive employer. If this occurs, employers may attempt to enforce restrictive covenants by way of injunctions. But winning an injunction in court can be tough, and it’s a time-intensive and cost-consuming process. By the time the case goes to court, the information is typically used to the competitor’s advantage. Therefore employers need to think of other means by which they can stop the transmission of corporate information.
Golden handcuffs
Golden handcuffs are surprisingly effective methods by which an employer may stop corporate espionage. Golden handcuffs are used in executive employment contracts to ensure the employee adheres to the agreement. Examples of golden handcuffs include stock options, share participation, retention bonuses and pension top-ups.
Golden handcuffs may be tied to a strong restrictive covenant, so that if the covenant is breached the negative consequences outlined in the golden handcuffs apply.
The employment contract must be drafted to ensure that maintaining the monetary “carrot” is linked to not breaching the covenant. Ultimately it may cause the departing employee to think twice about committing the crime, as he stands to lose a significant amount of his compensation.
Technological safeguards
Physically, employers should have technological barriers that block information from being accessed or transferred. Such tools may include passwords, encryption and firewalls. If the organization can develop controls by using security clearances and limiting access to information on a need-to-know basis, these types of safeguards will assist to protect proprietary information.
Natalie MacDonald is an associate with Grosman, Grosman & Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected].
