Trade secrets need to be kept secret. Obvious as this point may seem, it is often overlooked. A company with valuable information—customer data, unreleased products, engineering specifications, unique manufacturing methods, to name just a few possibilities—must treat it like the precious asset it is.
Sensible security measures will make it less likely that an employee, vendor, partner, or competitor will steal or misuse a company's trade secrets. Equally important, in the event legal action ever becomes necessary, the court will require the trade secret owner to show that it too reasonable steps to maintain the secrecy of its information. Here are five things your business can do to protect itself.
Five Ways to Protect Trade Secrets:
Identify and Label Confidential Documents
The first step a business should take is to work with an attorney to inventory business and technical information eligible for trade secret protection. Once identified, key documents and files should be clearly marked as "CONFIDENTIAL" so that there can be no mistake that the company regards them as confidential. Such labeling will be more effective if the company is selective in what it designates.
Restrict Access to Information
Do all employees need to be able to review, for example, a company's pricing, cost, and margin information? If not--and in all likelihood they do not—the company should strongly consider protocols limiting access to those whose job responsibilities actually require them to access such information.
Implement Employee Confidentiality Policies
A business with valuable trade secrets should ensure that its employee handbooks and policy manuals carefully address matters of confidentiality. The company should communicate clear guidelines for when, how, and for what purposes an employee may access the company's confidential information. Written policies are invaluable for promoting confidentiality and documenting any breaches.
Use Nondisclosure and Noncompete Agreements
A business that shares confidential information with employees, customers, vendors, partners, or others should be sure that the information is covered by a nondisclosure agreement, which will give rise to liability for breach of contract in the event the information is misused or wrongfully disclosed. In many cases, a carefully crafted non-compete agreement with employees and executives will be appropriate and even critical for keeping a company's information from falling into the hands of a competitor.
Conduct Exit Interviews
A best practice is to conduct an exit interview with any employee leaving the company. Exit interviews provide an occasion to remind an employee of his or her post-termination obligations and help avoid later allegations that the employee is unaware of his or her obligations. An exit interview can also be an opportunity to gather facts about potential risks posed by the employee's next position.
Trade secrets can be among a company's most valuable assets, and technology has made trade secret misappropriation shockingly easy. Reasonable confidentiality measures such as those outlined above can be highly effective in preventing misappropriation. Such measures will also make a business more likely to obtain court relief in the unfortunate event that trade secret misappropriation occurs.
This legal blog is written by attorney Maxwell Goss. Max practices business litigation, with a focus on non-competes, trade secrets, shareholder dispute, and intellectual property.