Startups are known for developing transformative and disruptive businesses, due to the very entrepreneurial and bold essence of their founders and employees. Their three primary and valuable assets are: (i) human capital, the people who strive to develop businesses to solve problems; (ii) inventions, products to be offered; and (iii) strategic and confidential information on the business.

The Intellectual Property Law assures protection against disclosure, exploitation, or use of confidential information or data usable in industry, commerce, or the provision of services, obtained by virtue of a contractual or employment relationship, even after expiration of the contract.

In addition, the Intellectual Property Law provides that rights relating to computer programs (software) developed and prepared by employees during the term of their employment belong exclusively to the company.

Information protected by law, therefore, is restricted to information considered confidential or, in the case of the Intellectual Property Law, only information related to the development of computer programs (software).

The result is a group of information, materials, and products that, while not expressly protected by law, may cause serious harm to companies and their businesses if disclosed or used without consent.

How then does one ensure the protection of this information? How does one prevent ideas and projects from being revealed in a highly competitive market?

Firstly, it is important to remember that startups, as employers, have the right to use all creations made by employees in the exercise of their daily duties, as these creations are part of the scope of work.

Because this is a copyright relationship, employees may negotiate these rights. Thus, the inclusion of provisions dealing with the ownership of innovations in employment agreements, especially in the case of employees working in the fields of creation and development, is an essential measure to ensure a startup’s business.

Moreover, considering that there is no legal definition of “trade secrets” in Brazil, nor of “confidential information”, a practice highly recommended for startups is the inclusion of specific provisions in contracts defining in detail which information is considered confidential within the business, in addition to additional obligations establishing, for example, the return of documents to the company at the time of termination of employment, under penalty of damages.

This type of measure has become very common in employment relationships. However, some requirements must be observed to allow the contract to be enforced quickly and efficiently in the event of breach.

Failure to observe legal requirements, however, may make it difficult to demonstrate that the information discussed in any litigation was, in fact, confidential.

Confidentiality obligations, therefore, are essential to ensure the conditions necessary for mitigating (or at least reducing) risks of leakage of confidential information by employees and, especially, former employees.