TOC Previous Next A+A-Print


Question 106: What know-how may people use in serving their employers’ competitors?

I am president of my own management consulting firm, which specializes in helping small businesses obtain technical information and engineering assistance. More and more of our clients are new companies set up in third-world countries to supply products to those countries’ domestic markets at lower prices than comparable imports. In most cases, we obtain needed information from sources accessible to everyone—libraries, data bases, governmental agencies, and academic experts—and we deal with engineering problems by identifying firms or self-employed engineers with whom our clients can contract for needed help. Generally, the only troubling ethical problem has involved an occasional conflict of interest on our part, and we now avoid that by adhering to a strict rule never to accept clients who are or are likely to be in competition with one another.

Sometimes, though, the best source of information and help for a client is a competitor’s past or present employee. Such people are useful precisely because of what they have learned on the job. We do recognize some definite limits on how far we can go in using such sources. Bribing or deceiving a competitor’s employees to obtain its secrets and other methods of industrial espionage plainly are wrong. But after excluding such methods and the use of information and techniques that clearly are proprietary, we still regularly find ourselves in situations where it is hard to identify the ethical limits.

I suspect most people who confront this problem draw the line at what they think would be likely to provoke a lawsuit they cannot afford to lose. But that standard seems too loose in many cases and too tight in some. It is too loose when the source is a former employee of a company that probably either will not sue or will be unable to prove its proprietary information and techniques have been stolen. It is too tight when the source is a present employee of a company that jealously guards its rights with frequent lawsuits and claims they extend to absolutely everything its employees learn from the day they are hired. Just as employees have the right to quit their jobs and use their experience in new ones, so they surely have the right to use it in outside consulting, provided that does not interfere with what they are being paid to do during their working hours.

I would appreciate any help you can give me in drawing an ethical line between the legitimate and illegitimate uses of the experience of past or present employees of our clients’ competitors. Probably there is no simple rule for the many diverse cases, but perhaps you can suggest guidelines.


This question calls for the derivation of moral norms. Unless obligated by a valid and applicable contract not to do so, people who developed their talents while working for one company are free to use them in serving another. They also may continue to use commonly available information and techniques familiar to people in their field. But a company’s present employees should be loyal, and so generally should not help its competitors even in ways that would be permissible if they were former employees. With some exceptions, then, the questioner should not serve a client by drawing on its competitors’ current employees. The moral acceptability of using the expertise that sources have gained in their employment, whether past or present, depends on two things: whether they make available information and techniques that are the property of the previous employer, and, if they do, whether the previous employer can fairly forbid that use or require compensation for it. So, sound norms presuppose clarification both of the conditions that constitute ownership of information and techniques, and the limits owners can fairly set to others’ use of this peculiar sort of property.

The reply could be along the following lines:

No company owns everything its employees learn while working for it. To a great extent, their employment experience develops their personal abilities to gather information, organize material, plan tasks, solve problems, and so on. Such personal development would be the employer’s property only if the employees themselves could be property—that is, if they truly were slaves. Of course, the institution of slavery can exist as an unjust social structure, but, morally speaking, persons cannot be owned. Moreover, by their on-the-job experience, employees become aware of much commonly available information and learn commonly used techniques, and these acquisitions plainly do not belong to the employer. Thus, I agree with you in rejecting the view that an employer’s rights extend to everything employees learn from the day they are hired. Anyone who legitimately terminates his or her employment or is discharged from it may in general use acquired expertise in work performed for a new employer, even if the two employers are competitors.

By contrast, a company’s current employees generally should be committed to promoting and safeguarding its legitimate interests. Helping a competitor by supplying service not otherwise readily available to it generally would violate that commitment and constitute grave disloyalty. Many employers try to forestall this by requiring employees to promise to avoid such behavior or by threatening to dismiss anyone found guilty of it. But even without any explicit contractual requirement or other enforcement measure, employees ordinarily assume an obligation of loyalty to their employer simply by accepting employment.

Someone might point out that lawyers and accountants may provide professional services for competing firms, provided the specific matters they handle generate no conflict of interest. So—it might be argued by analogy—current employees may do work for a company’s competitors on the same basis as former employees, provided all specific duties pertaining to both jobs are fulfilled. But lawyers and accountants are engaged to supply services that they and others in their professions openly offer to all clients on the same basis; thus, their duty of loyalty to a client, though no less serious, is different from that of a company’s employees. Since employees are one of the groups that constitute a business—by cooperating with investors, managers, customers, and suppliers—the company’s common good calls for a commitment and loyal service. That commitment bars employees from significantly serving competitors by providing any technical information and engineering assistance not otherwise readily available.

Of course, in exceptional circumstances a current employee can rightly help a company’s competitor, even when a contractual obligation forbids it. A company’s employee sometimes can serve its competitor without disloyalty if the employer-employee relationship is seriously unjust and the employee is the victim of exploitation, though even in such a case helping a competitor could be unfair to fellow employees and/or some other participants in the business. Again, at times an employer might not be injured and might even be benefited by an employee’s helping a competitor; then the employer’s permission should be obtained unless it can be confidently presumed. The overriding claims of the common good of the wider society also could lead patriotic people to help their employer’s competitors in order to meet an urgent need—of the society as a whole or of some fellow citizens—for a good or service.

In sum, with some exceptions, a company’s present employees should not significantly help a competitor by supplying a service not otherwise readily available to it. Now, it would be wrong for you to intend that anyone you use to serve your clients do what he or she should not do. Therefore, you generally should not use current employees of your clients’ competitors. You may not make exceptions unless confident that special circumstances allow an individual to serve his or her employer’s competitor without being disloyal. Moreover, even when a company’s current employees are rightly serving a competitor, they have the same obligations toward the company as former employees have. Your question focuses mainly on those obligations, which I shall now consider.

To begin with, like current employees, former employees may be barred by contract, at least for a certain stretch of time, from communicating specific information to anyone outside the company or from working for a competitor. Of course, such contractual constraints are not absolute. Sometimes they are unreasonable, and courts might find them to be invalid. In other cases, though reasonable in general, they admit exceptions as other promises do (see LCL, 412–14). Still, you should not intend that anyone you enlist to serve a client violate any contract with a former or present employer unless you are convinced that the contract is invalid or that its relevant provision is inapplicable in a particular case so that an exception to it will be morally justified.

In making such judgments, two possible sources of confusion must be kept in mind. First, if a company’s former employees have not been justly compensated for their contributions to the enterprise’s discoveries and innovations, or have some other just claim against their former employer, they deserve appropriate compensation. But even though they might be eager to obtain it by serving the former employer’s competitor, that might well be unjust. You should not use such persons to serve your clients unless convinced they can rightly do so. Second, a company’s former employees sometimes help its competitor duplicate some discovery or technical innovation without explicitly communicating it—for example, by pointing out which commonly available information and generally used techniques are relevant to the discovery or innovation and which are not. But such indirect communication is wrong if intended to evade their responsibility to refrain from communication.

The problem about proprietary information and techniques can be more clearly defined by referring to two other things. On the one hand, as I noted at the beginning, a previous employer has no right to the development of employees’ talents resulting from their work or to the commonly available information and widely used techniques they appropriated while employees. On the other hand, industrial espionage often is used to obtain a company’s secrets—for example, plans to raise or lower prices, increase or reduce production, file or settle a lawsuit. Such information is not so much a company’s property as part of its inner self, much as individuals’ private thoughts and intentions pertain to their persons rather than belong to them as property does. Since you provide clients with technical information and engineering assistance, your question about ethical limits does not concern company secrets. Putting aside as irrelevant these two things, then, I shall focus on information and techniques that could reasonably be regarded as a previous employer’s property. The problem is how to draw lines when such property rights are not clear.

Basic human goods and other factors antecedent to law provide a foundation for property rights and responsibilities, but they must be specified by authoritative social judgments and choices (see LCL, 795–99). To identify something as the property of a particular individual or organization, relevant legal provisions must be taken into account. Such legal provisions, therefore, are among the criteria for identifying information and techniques as a company’s property. The relevant provisions are found not only in statutes but in case law—in the decisions that might serve as precedents in a lawsuit alleging a violation of property rights. So, in judging whether the information and techniques a person has acquired while working for a particular company are its property, one must consider whether it would have a sound legal basis for asserting a proprietary interest in that information and those techniques.

As you say, it would be wrong to draw the line only at what you think would be likely to provoke a lawsuit you could not risk losing, since circumstances irrelevant to the merits of a claim of ownership often make its enforcement at law impractical or even impossible. But if existing law probably would not support a company’s claim that certain information and techniques were its property, it would be reasonable to assume that they were not. On the other hand, if existing law probably would support the claim, it almost certainly should be considered valid.

Someone might object that the existing, relevant law might be unjust. It should be presumed just, however, unless the contrary can be shown. And showing that involves special difficulties. This sort of property and the conflicts that arise regarding it are remote from people’s everyday experience, and only statutes and the adjudication of conflicting claims will have specified the conditions under which information and techniques can and do belong to people’s former employers.

What about cases in which neither existing law nor relevant contracts and patents make it clear whether certain information and/or techniques belong to a former employer? In general, when an enterprise leads to fresh discoveries or the creative development of technology, these fruits belong to the people whose efforts brought them about, unless they did what they did as justly compensated employment, in which case the fruits belong to the enterprise’s owners. But if commonly available information and techniques are used to obtain some new result, the result’s newness does not justify the assertion of an exclusive claim to that information and those techniques. Moreover, if a company’s employees make discoveries or creatively develop techniques partly in fulfilling their duty as employees and partly as a result of their own uncompensated or inadequately compensated efforts, those fruits of the enterprise belong partly to the owners and partly to the employees.

Even when information and techniques clearly belong to a company, it might not be justified in trying to keep such property to itself. In general, owning property does not entail an unlimited right to forbid its use or be compensated for it (see LCL, 800–806, 811–14). Owners of technical discoveries and technological advances have some right to their use, but they also have a responsibility fairly to administer the use to meet genuine human needs. This could morally oblige a company to share its proprietary information and processes with others, perhaps even with competitors, with or perhaps without compensation. Suppose, for example, a company developed a way of generating electrical power more cheaply and with less adverse environmental impact than any current method; suppose also that it could exploit the new technology to meet the needs of only a small part of the world’s people. It ought to share its advance with others able to use it to meet everyone’s needs; and although the company may be entitled to compensation, the amount must be limited to what is fair and should not exclude the very poor from enjoying the new technology’s benefits.

To some extent, no doubt, these considerations about ownership responsibilities and the limits they impose upon a company’s rights in respect to its technical discoveries and technological advances are taken into account by the same body of law that helps define and identify such property. But existing U.S. law may not allow adequately for international socioeconomic structures and relevant differences between third-world and domestic companies. So, at least in certain cases, you might be justified in recruiting a competitor’s former employee to help a third-world client though not a domestic client.310 Only after taking all the circumstances into account, however, could you judge a client entitled to uncompensated use of its competitor’s proprietary information and processes. Of course, in making such a judgment, you must not let your own interest in serving your client lead you to rationalize conduct that would amount to stealing proprietary information and techniques.

310. Paul Steidlmeier, “The Moral Legitimacy of Intellectual Property Claims: American Business and Developing Country Perspectives,” Journal of Business Ethics, 12 (1993): 157–64, describes the conflict between a view that tends to absolutize owners’ claims to intellectual property and a view that limits those claims—as Catholic social teaching does—by other peoples’ rights to livelihood and development. But he neither criticizes the former view nor notices that ownership claims which are just in the U.S. might be unjust in a third-world country.