F-12: Maintaining Confidentiality

Statement of the Case: Engineer A was hired as an electrical engineer by Company B, a small
manufacturer of control systems for heavy lifting equipment used by loggers and contractors.
The total market consisted of about 200 logging firms, and the company had about a quarter of that market. That is, about 50 of the logging firms used the control system and were repeat
customers, providing about 90 percent of Company B’s sales volume. The control system was
not patented. Although the device was patentable, Company B’s owner had decided to keep the concept secret, and all employees, including Engineer A, signed trade secret documents, agreeing that they would not disclose or otherwise duplicate, use, or sell the concept.

Explanation: This paragraph is setting up a confidentiality / trade secret ethics case. Let’s break it down in a structured way.

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1) Who is involved

• Engineer A → employee (electrical engineer)

• Company B → small manufacturer of control systems

• Customers → logging firms (about 200 total in the market)

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2) Business context (important for understanding risk)

• Company B has:

  • ~25% market share (≈ 50 firms)

  • These customers generate ~90% of its revenue

👉 This means:

• The company is highly dependent on a small client base

• Losing competitive advantage could seriously harm the business

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3) The key technical asset

• The control system:

  • Not patented

  • But could have been patented

Instead, the owner chose:

Trade secret protection

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4) What is a trade secret?

A trade secret is:

• Valuable technical/business knowledge

• Kept confidential instead of publicly disclosed (like a patent would be)

👉 Examples:

• Design methods

• Algorithms

• Manufacturing techniques

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5) Why NOT patent it?

If patented:

• The design becomes publicly disclosed

• Others can study it (but can’t legally copy for a period)

If kept as a trade secret:

• No public disclosure

• Protection depends on keeping it confidential

👉 So secrecy = survival

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6) Engineer A’s obligation

All employees (including Engineer A):

• Signed trade secret agreements

That means they agreed:

• ❌ Not to disclose the concept

• ❌ Not to copy or reuse it elsewhere

• ❌ Not to sell or transfer the idea

👉 This is both:

• A legal obligation

• An ethical obligation

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7) Why this matters ethically

Under professional standards (e.g., Professional Engineers Ontario):

Engineers must:

• Protect confidential information

• Act with loyalty to their employer/client

• Not misuse proprietary knowledge

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8) What the paragraph is really setting up

This is a classic ethics scenario setup:

👉 Likely upcoming issue:

• Engineer A may later:

  • Leave the company

  • Use the design elsewhere

  • Disclose the secret

And the question will be:

Is that ethical?

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9) Simple interpretation

Company B relies heavily on a secret design for its business, and Engineer A has legally and ethically agreed to keep that design confidential.

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10) Exam insight (very important)

When you see:

• “Not patented” + “trade secret agreement”
  👉 Immediate flags:

• Confidentiality duty is VERY strong

• Misuse = likely misconduct

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After about three years as an employee, Engineer A resigned from Company B to set up her own firm. She designed a more advanced control device, improving upon the concept invented by Company B. To sell her device, Engineer A contacted Company B’s 50 key repeat customers to get them to switch allegiance to her new firm and to her improved product. Company B sued Engineer A in civil court for breach of the confidentiality agreement, and won the case. In her defence, Engineer A stated that, during her employment at Company B, she became aware of  flaws in the original device and her improved device overcame those flaws. Testimony

confirmed that she had never told colleagues at Company B that she was aware of such flaws,

nor did she suggest improvements to the device while employed there. After the civil court

judgment, the owner of Company B asked the provincial Association to discipline Engineer A

for unprofessional conduct.

Question: Is Engineer A guilty of professional misconduct?

Authors’ Comments: Since Engineer A was found liable in civil court, the ruling tends to

confirm the facts of the case. Engineer A did not act as a faithful employee of Company B. She

was apparently aware of flaws in the control device, but rather than use this knowledge for the

benefit of her employer, she used it, and the company’s trade secrets, to her own advantage. She even used Company B’s proprietary list of regular customers to advance her personal welfare.

Such self-serving behaviour is contrary to the Code of Ethics and constitutes professional

misconduct. The Association, almost certainly, would pursue disciplinary action.