How can Vietnam-based enterprises prevent the risk of being disclosed trade secrets by employees?

Trade secret (“TS”) is especially important in determining the success of an enterprise. Therefore, along with the development, enterprises must find ways to prevent competitors from accessing their TS. One of the subjects that can disclose TS is employees because they are the ones accessing TS directly. So how can enterprises prevent the risk of being disclosed TS by employees?

This article is written in the context that BLawyers Vietnam provided our legal advice to an enterprise operating in the IT section in Vietnam.

trade secret

I. What is a trade secret?

Pursuant to intellectual property laws, TS is the information that an enterprise has obtained from financial and intellectual investment activities, which has not been disclosed and is capable of being used in business. Thus, the conditions to be considered as an enterprise’s TS include:

  1. Has not been disclosed to the public and is unknown in the business community;
  2. Generating economic benefits for an enterprise; and
  3. The enterprise makes the necessary efforts to maintain this secret.

In addition, pursuant to labor laws, employees must protect TS. In case of disclosing TS, employees may be subject to several sanctions such as compensation for damage, being applied labor disciplinary measures as dismissal.

II. The ways to protect trade secret

The current laws do not have specific regulations on what types of information are recognized as TS and how to protect TS. Enterprises can control employees by managing data access, email management, limiting the use of electronic devices and computers during working hours, etc. However, such control in a strict way would bring to enterprises more losses than benefits. Per BLawyers Vietnam’s experience, enterprises can use the method of signing commitments with employees to protect their TS reasonably. This commitment can be established in the following ways:

1. Commitment by the non-disclosure agreement

As mentioned, in the process of working for the enterprises, employees will almost always be exposed to the information of the enterprises, the higher the position, the greater the ability to access TS. Currently, the laws allow employers and employees who are directly related to TS to agree in writing on the content and duration of TS protection and compensation if the employee violates this commitment.

Therefore, to protect TS, enterprises can agree on a non-disclosure agreement after terminating the labor contract. However, enterprises need to pay attention to the following issues so that the non-disclosure agreement is not rejected by a competent authority if a dispute occurs:

  1. Making a non-disclosure agreement separate from the labor contract. At that time, the competent authority would consider this agreement as a civil agreement;
  2. The contents of the agreement have a balance of rights and obligations of both the employee side and the enterprise side; and
  3. The term of protection of TS and the compensation should be agreed upon to a reasonable extent.
2. Protecting TS with labor rules

In addition to committing to a non-disclosure agreement, enterprises can protect their TS through internal labor rules. Of which, enterprises need to clearly state employees’ obligation of not disclosing the TS and the labor disciplinary measures by labor laws such as reprimand, demotion, dismissal, etc.

The enterprises should note the promulgation of labor regulations as follows: (1) if employing 10 or more employees, the labor rules must be in writing and registered with competent authority; and (2) if employing less than 10 employees, it is not compulsory to issue written labor rules but must agree on the content of labor discipline and material responsibility in the labor contract.

3. Updating the protection of trade secret policy for employees regularly

Updating the protection of TS policy and the consequences of disclosing TS to employees regularly will help employees realize the importance of protecting TS and the seriousness of violations. Enterprises can use the following options:

Option 1: Self-organizing periodical training sessions for employees on which information is TS and ways that enterprises self-protect the TS. Self-studying of employees regarding that information is rare to happen.

Option 2: Hiring/ inviting experts or/and experienced lawyers to conduct training sessions for employees. The fact that a lawyer mentions regulations of laws and shares his experience in dealing with the breaches or updates valid verdicts/ decisions of competent State authority would impact strongly to employees’ awareness.

In summary, making requirements for employees on the protection TS is a necessary issue. Enterprises can use the above methods to prevent the risk of their TS from being disclosed.

Should you have any questions about the above contents, please revert to BLawyers Vietnam at consult@blawyersvn.com. We are more than happy to hear from you!

Date: 19 June 2022

Writer: Tuyen Pham

Maybe you want to read:

Non-disclosure agreement after termination of labor relationship – Viewpoint from a real dispute case

Talks with Conventus Law about Labor Code 2019

Updated: How is illegal one-sided termination of labor contracts by employers pursuant to the law of Vietnam?

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