Mention “intellectual property” to most business people today and the immediate image that comes to mind is the traditional registrable forms of intellectual property: patents, trademarks and copyright. But the reality, of course, is very different.

Today more than ever, intellectual property also includes confidential business information, trade secrets, know-how and key business relationships. 

What do all these forms of IP have in common? They are the product of human ingenuity, innovation, and initiative: in short, knowledge. In his book, Developing Knowledge-Based Client Relationships (easily the best book I have read on adding value to clients through knowledge transfer), Ross Dawson argues that knowledge and relationships are the only true sources of sustainable competitive advantage in a knowledge-based economy. But what is knowledge, and how can you protect it? 

Knowledge is what happens to information when human ingenuity is applied to it. Information alone does not confer competitive advantage. Knowledge does. It is human ingenuity that turns information into knowledge and gives it value. And it is this knowledge that is the underlying value of the intellectual property or capital of an organization–its relationships, know-how, trade secrets, and confidential business information. 

Most sophisticated business enterprises (whether small, medium, or large) recognize the need to protect this vital intellectual property. But, too often, beyond applying for patents on new inventions or trademarks on new brands, little real attention is paid to protecting or securing these less formal types of intellectual property. Indeed, many businesses are surprisingly oblivious to the fact that these vital intellectual assets are walking out their front door on a daily, weekly or monthly basis, and heading across the street to rival competitors. What to do? 

1.  Awareness – The first task of any business is to recognize this reality. Awareness of the need to protect the company’s most valuable strategic assets is the first step, without which no effective risk management program can be initiated. 

2.  Take Stock – The second step is to take stock of your company’s core intellectual property. Apart from your inventions and branding strategies, how valuable do you think your business relationships, contacts, customers and suppliers would be to your competitors? What know-how differentiates you from your rivals and gives you a strategic advantage over them in the market place? Do you have any trade secrets or unique technical expertise or processes that are worth protecting? 

3.  Ownership – Who owns these key strategic assets? Are you sure? How much of this differentiating know-how or expertise does the company really own? How much of it is the cognitive intellectual capital, i.e., the internalized knowledge or experience, of your key executives, employees, or contractors?

When executives or key employees leave 

These questions raise a more fundamental question: What knowledge or information can the employer legitimately claim as its own, and what knowledge or information can the executive or employer take away with impunity? 

The 20^th Century science philosopher, Michael Polanyi, argued that scientists, and society generally, must learn to distinguish between explicit knowledge and what he referred to as “tacit” knowledge. To him, “we can know more than we can tell.”  The law recognizes this distinction, but frames the distinction differently. 

When an executive or key employee leaves the company, he or she is free to take as much of their explicit knowledge with them as they can remember; but they cannot necessarily use it all. Some of this explicit knowledge may be inseparably infused with confidential information belonging to the employer. And they can take all their tacit knowledge, including their experience, skill sets, and acquired expertise, which they can use. They couldn’t leave this tacit knowledge behind even if they wanted to, any more than they could leave their memory behind. Nor do the courts even try to stop this, quite simply because they can’t. The law does not require executives or employees to “forget” what they know. But it does sometimes require them to artificially partition their minds so as to separate out that general or tacit knowledge (which is theirs and which they are free to use) from the confidential business information that rightly belongs to their employer, which they are not free to use. The key is defining what that is, and how to draw the line.

1.  Make confidentiality a cultural value - Start by taking the confidentiality of your key intellectual property seriously. Make the secrecy of your key intellectual assets a cultural value in your organization by treating this information as confidential at all times.

2.  Revisit your contracts - Ensure that all your employee and contractor agreements include appropriate confidentiality, intellectual property, and non-competition clauses. If they don’t, start now. In a future column I will discuss how you can “fix up” the old ones.

3.  Establish a proprietary rights policy – Develop and put in place a Proprietary Rights Policy tailored to your company’s requirements, and enforce it.

4.  Conduct exit interviews – Too often employee departures (particularly those of executives and senior employees), whether resignations or terminations, are managed casually and informally. At the time of departure, remind the employee of his or her duty to ensure they leave all the employer’s confidential information behind, and that they have erased, deleted and wiped all their personal lap tops, BlackBerrys and other electronic devices clean of the company’s proprietary information. 

Start with these steps and you will be well on the way to securing that most valuable strategic asset you have: your intellectual capital. 

Robert Nadeau is partner at the firm of Kerr & Nadeau, Barristers & Solicitors, Patent & Trademark Agents, Halifax. Mr. Nadeau can be reached at (902) 422-6376, or visit their website at www.kerrnadeau.com.