Don’t Let Trade Secrets Leave With Departing Employees

The courts are filled with cases of former employees stealing proprietary information from the companies they worked for. Before leaving their jobs, these former employees took software, files, customer lists and other proprietary information and either use them in their new positions with competitors or start competing businesses with them. Care must be taken to protect the valuable trade secrets that keep your company competitive.

The first step is to identify trade secrets by reviewing company information. Trade secrets can include many confidential aspects of a business. To warrant protection under the Economic Espionage Act, the Uniform Trade Secrets Act, and most state laws, the information must be unique to your business, rather than general secrets of your trade or industry.

To be successful in litigation, a company must generally show:

• The trade secret has independent economic value, provides a competitive advantage and is not generally known to the public.

• The company has taken reasonable efforts to maintain the secret.

• Limit access to proprietary information as much as possible.

• Encrypt electronic files so that they can’t be read or taken off the premises.

• Mark any papers, photographs, sketches and other documents as confidential. Attach electronic sensors to trade secret items.

• Prohibit photocopying of trade secrets and other sensitive company information. Consider forbidding cameras on the premises, including cameras included in cell phones.

• During exit interviews, remind employees leaving the company about their obligations and your trade secret protection policies.

• Make sure you have strongly-worded non-disclosure agreements, as well as other policies and procedures concerning your ownership of trade secrets and proprietary company information. These agreements need to be signed by employees indicating that they have read and understand them. Outside contractors that need access to sensitive business operations should sign confidentiality agreements. Your attorney can draft these documents.

• Maintain logs of which employees in the company have rights to access trade secrets.

• Be careful that no one in the company inadvertently divulges trade secrets. For example, watch what employees disclose at industry trade shows. Review technical literature, service manuals, press releases and other material distributed outside the company. Similar reviews should be made of any filings with the SEC or in patent applications.