Walking out the door: Australian approaches to safeguarding confidential information and intellectual property

Katrina Crooks
Spruson & Ferguson Lawyers, Sydney
katrina.crooks@spruson.com

Kelly Guo
Spruson & Ferguson Lawyers, Sydney
kelly.guo@spruson.com

Introduction

The protection of confidential commercial information is attracting increasing judicial attention in Australia. Recent Federal Court proceedings illustrate both the breadth and limitations of available causes of action and the practical challenges of obtaining evidence to prosecute these claims.

Australia has no dedicated legislative framework for trade secrets comparable to the US Defend Trade Secrets Act. However, a range of overlapping causes of action are available drawn from equity, statute and common law. The most robust strategies typically involve pleading multiple causes of action in combination to ensure no gaps arise from the limitations of any single doctrine.

Litigation involving such claims may become more common following the coming into force of the Australian government’s upcoming reforms to prohibit the use of non-compete clauses in employment contracts for employees earning below AU$175,000, which takes effect from 2027.

Non-compete clauses in employment contracts provide a frontline mechanism for trade secret protection. By restricting a departing employee’s ability to work for a competitor or solicit the employer’s clients and staff for a defined period, these clauses provide a practical buffer during which the commercial sensitivity of information held by the former employee diminishes. Despite uncertainty surrounding enforceability, such clauses have remained standard in Australian employment contracts. However, as more employees become free to more quickly join competitors after the completion of their employment in the absence of restraints, more breach of confidence claims are anticipated.

This article provides an overview of the principal causes of action for trade secret protection in Australia and the practical lessons highlighted by recent cases.

The principal causes of action

Breach of confidence

Trade secret protection in Australia is principally grounded in the equitable doctrine of breach of confidence. The doctrine arises not from any proprietary right, but from an ‘obligation of conscience’ to maintain confidence arising from the circumstances in which information is imparted. To establish a claim, four elements must be demonstrated as per the ruling in New Aim Pty Ltd v Leung (No 4) [2025] FCA 747: (1) the information must be identified with specificity; (2) it must possess the necessary quality of confidence; (3) it must have been received in circumstances importing an obligation of confidence; and (4) there must be actual or threatened misuse without the plaintiff’s consent.

The doctrine is broad and flexible. It applies regardless of whether a contract exists between the parties, and depending on the circumstances, it can protect a wide range of subject matter, including technical know-how, commercial strategies, customer lists and financial data. Courts may grant injunctions, including on a preliminary basis, award equitable compensation or damages or order an account of profits. Relief may extend to third-party recipients who receive confidential information with actual or constructive knowledge that it was obtained in breach of confidence or who are made aware of its confidential nature after receipt, for example, a new employer: Farm Transparency International Ltd v New South Wales (2022) 277 CLR 537; Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] 4 All ER 781.

A key question is whether the relevant information has the necessary quality of confidence. Difficulties often arise in distinguishing between an employee’s personal skill and knowledge, which the employee is entitled to retain, and the employer’s confidential information, which is protectable.

Relevant factors in assessing this question include the skill and effort expended to acquire the information and the value of it to the owner, the measures taken to protect it and whether the employees were made aware of its confidential nature, as well as industry practices.

New Aim highlights the importance of identifying with precision the specific body of information alleged to be confidential, as well as the significance of the protective measures an employer takes in respect of confidential information to maintain its quality of confidence. The applicant alleged that a departing senior employee had misused supplier identity and contact information to benefit a competitor. At first instance, the Court dismissed the breach of confidence claim: New Aim Pty Ltd v Leung (No 4) [2025] FCA 747. However, the Full Federal Court allowed an appeal: New Aim Pty Ltd v Leung [2026] FCAFC 49. Key factors in establishing the requisite nature of confidence included the significant commercial value of the specific 17 supplier relationships, who had been identified as particularly reliable suppliers, the substantial time and effort required to identify reliable suppliers, New Aim’s practices of white-labelling products and restricting electronic access to supplier data and, critically, the former employee’s own awareness as a senior executive, gained through discussions with New Aim’s management, that supplier information was commercially sensitive and required protection.

The respondents further argued that the supplier contact details could not ‘realistically be isolated for disentangle[ment] from Mr Leung’s “know-how”’. The Full Court noted the considerable force of this argument insofar as it related to all suppliers to the applicant, including those that were inactive. However, information concerning the specific 17 suppliers in question was capable of ready isolation from Leung’s general experience and judgment, particularly given that the information was held by Leung in written form and had been quickly relayed to a competitor.

Copyright protection

The Copyright Act 1968 (Cth) provides a complementary avenue for protection where a trade secret is embodied in a copyright work. This most commonly arises in relation to software source code, which is protected as a literary work and a computer program under the Act.

However, important limitations apply. Copyright only protects copyright works and only the expression of ideas, not the ideas themselves. A competitor who reverse-engineers functional concepts underlying software without reproducing the actual code may not infringe copyright, even if the underlying trade secret has effectively been appropriated. Copyright should, therefore, be viewed as one component of a broader protection strategy rather than a standalone solution.

Directors’ duties

Where the person responsible for misappropriating trade secrets is a director or officer, statutory duties under the Corporations Act 2001 (Cth) may provide a further basis for relief. Key provisions include the duty to act in good faith and in the best interests of the corporation (section 181), the duty not to improperly use one’s position (section 182) and the duty not to improperly use information obtained by virtue of one’s role (section 183). A director who takes confidential information to establish or benefit a competing business may breach one or more of these duties.

The remedies available under the Corporations Act are extensive: courts may order compensation, disgorgement of profits and civil penalties and, in serious cases, the Australian Securities and Investments Commission may take enforcement action. These duties extend not only to formally appointed directors, but also to shadow and de facto directors, broadening the potential scope of liability in trade secret disputes.

Fiduciary duties

A fiduciary relationship arises where a relationship of confidence exists such that equity imposes duties to prevent its possible abuse: Hospital Products Ltd v United States Surgical Corp (1984) 55 ALR 417. Examples include directors and the company and, in some cases, senior employees and the employer. In a trade secrets context, employers have relied on fiduciary claims to prevent employees from diverting business opportunities to competitors using confidential information obtained during their employment.

Breach of employment contract

Where an employment contract contains express confidentiality obligations, as is common in professionally drafted agreements, a contractual claim for breach of the employment agreement may also be available. Such clauses typically define categories of confidential information, impose obligations of non-disclosure and non-use during and after employment and may require the return or destruction of confidential materials upon the termination of the employment contract.

A contractual claim offers certain practical advantages. The scope of the obligation is defined by the terms of the agreement rather than the more fluid equitable principles governing breach of confidence, which can simplify issues of proof.

However, the effectiveness of a contractual claim depends on the quality of the drafting. For this reason, the careful drafting of employment agreements remains an important preventive measure.

Obtaining evidence of a breach

Preliminary discovery

One of the most significant practical obstacles in trade secret litigation is the inherent information asymmetry between the parties: the trade secret holder suspects misuse but the necessary evidence is, almost by definition, in the hands of the alleged wrongdoer.

Australia’s preliminary discovery regime, codified in rule 7.23 of the Federal Court Rules 2011 (Cth), provides a valuable mechanism for bridging this gap. The rule permits a prospective applicant to obtain discovery from a prospective respondent where the applicant reasonably believes it may have a right to obtain relief, but after making reasonable inquiries lacks sufficient information to decide whether to commence proceedings. It is significant that the requirement is only that the applicant believes it may have such right. The Full Federal Court confirmed in Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (2017) 257 FCR 62 that a preliminary discovery application is not aimed at descending into a mini-trial on the merits. As such, the threshold for obtaining preliminary discovery is considered to be relatively low once a clear foundation for potential infringement is established.

In Aristocrat Technologies Australia Pty Ltd v Light & Wonder, Inc. [2024] FCA 439, the Court granted preliminary discovery to enable Aristocrat to assess whether former employees had used confidential game design information, including mathematical models and pay tables, in developing a competing product. However, it declined to require discovery of the source code, due to inadequate evidence of copying of the actual code.

Search orders (Anton Piller relief)

In extreme circumstances, where there is a real risk that evidence may be destroyed or concealed, the court may grant a search order (historically known as an Anton Piller order). This order may permit specified persons to enter the respondent’s premises, inspect and remove documents and other material and preserve that material pending final determination of the proceeding. Given their invasive character, search orders are invariably made ex parte and are subject to strict conditions, including the appointment of an independent solicitor to supervise execution.

By way of example, in the Fortescue v Element Zero litigation, Fortescue alleged that former senior employees had misappropriated confidential information to establish and benefit a competing startup. Fortescue applied ex parte for an Anton Piller order, an application which involved the filing of 12 supporting affidavits. The order was granted, hard-copy material and devices were seized, and provided to the Court and independent experts. The order survived a subsequent application to set it aside, although Fortescue’s access to the seized material remained limited (see Fortescue Limited v Element Zero Pty Limited (No 2) [2024] FCA 1157; and Fortescue Limited v Element Zero Pty Limited (No 3) [2025] FCA 1295).

Conclusion

Trade secret protection in Australia sits at the intersection of intellectual property, equity, corporate law and employment law. No single cause of action provides a complete answer. The most effective strategies draw on multiple overlapping doctrines, tailored to the specific facts and commercial context of each case.

Practically speaking, a key strategy for employers remains ensuring employment contracts contain well-drafted provisions protecting confidential information and intellectual property, both during and after employment. Attention should also be paid to identifying information that is considered confidential, putting approach protective measures in place and communicating to employees what information is confidential. Equally important is being prepared to act swiftly when a breach is suspected. Prompt action can be essential to obtaining urgent interlocutory relief and, in appropriate cases, Anton Piller orders.