Loose Lips Sink Companies: Trade Secrets 101
Trade Secrets 101. Imagine this. You own a business and employ ten workers. You need to downsize, so you lay off three workers. One of them joins a competitor and takes the information they learned with them.
The risk of secret trade breaches is increased when an employee leaves the company. This becomes even more problematic if they leave on bad terms and then go to a competitor. Employers of all sizes must strategically position themselves to handle such conflicts as soon as possible, both as potential plaintiffs and defendants. Here are a few things to take into consideration and potential ways to manage them.
Trade Secrets 101 – Before You Hire.
The first opportunity to consider possible problems is before you hire someone. When you first The onboarding process is a critical time to address potential issues, including trade secret issues. Potential hires should know what is expected and the content of agreements and policies should be discussed. Company policies and employment agreements should specifically proscribe the use of confidential information from any previous employer. Further, employees should affirm in writing that they won’t use such information during the employment period.
Trade Secrets 101 – Executing Reasonable Action Steps.
A trade secret, under United States law, is defined as information not generally known or ascertainable outside of the owner’s organization and control; where the owner derives some independent economic value or a business advantage, and where the owner makes reasonable effort to keep the information secret.
Companies can employ a variety of devices to protect their trade secrets, among them are:
- Conduct ongoing employee training on the importance of maintaining confidential all proprietary information.
- Requiring all employees with access to trade secrets to sign agreements.
- Restrict access to proprietary information to only those personnel with a need to know.
- Adopt stringent confidentiality policies and uphold them.
- Implement measures such as password protection and company VPNs.
- Regularly monitor when and how data is transferred.
Legal Considerations.
Consider confidentiality agreements aka non-disclosure agreements (NDAs). However, be aware that contracts are governed by individual states. Not all state laws are created equal. Therefore, an NDA that is enforceable in one state may not be in another or it may have certain restrictions. In some states, courts view NDAs unenforceable if they function as non-competes without reasonable exceptions. The same goes for non-solicitation clauses, which prevent former employees from stealing clients. Know the law of your state.
Generally, any copyrightable content created by an employee within the scope of their employment belongs to the employer. That is not necessarily the case with patentable inventions. Often to protect patentable intellectual property (IP) created during employment, employers will have employees sign invention assignment agreements. However, laws in many states protect employees’ rights to inventions developed independently on their own time. One example is New York law. It provides that inventions developed using only the employees’ resources are exempt, unless they directly address the employer’s business.
Conclusion.
An employer that addresses these issues from the outset by using comprehensive agreements and other devices can better protect their trade secrets and avoid employment landmines. Here is a document published by the United States Patent & Trademark Office.
Francine D. Ward
Attorney-at-Law, Author, Speaker
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