Trade secrets are information that companies keep secret to give them an advantage over their competitors. Patents and Copyrights must be disclosed to be protected while Trade Secrets are protectable because they are not disclosed. While one of the most familiar examples of a trade secret is the formula for Coca-Cola, trade secret also protects customer identities and preferences, vendors, product pricing, marketing strategies, company finances, manufacturing processes and other competitively valuable information. However, to qualify for protection, it is important to adequately safeguard trade secrets. In order for a trade secret litigant to secure court assistance in any jurisdiction so that its rights may be enforced, there is a fundamental requirement that the litigant must prove that the company exercised reasonable safeguards to protect secrecy.
Benefits from a Program to Safeguard Trade Secrets
Aside from enhancing a presentation in court, significant benefits may be gained from a thoughtfully conceived and implemented program to safeguard against the disclosure of trade secrets. Programs to safeguard trade secrets should heighten employee awareness of a company’s interest in protecting certain information, which may discourage or thwart attempted misappropriation. An institutionalized program may also discourage new employees from introducing unwanted trade secrets from a former employer.
Placing Employees on Notice
Although it is not necessary to use written agreements to prevent use or disclosure of an enterprise’s trade secrets by its employees, because employees are under an implied duty not to use or disclose trade secrets of the employer, it is elemental that one of the best opportunities to acquaint employees with an enterprise’s claim to trade secrets is through the hiring and employment agreement process. There are many ways to approach the hiring process including using employment agreements to restrict unauthorized use and disclosure. A company should have a well-developed set of rules and guidelines designed to negate disclosure of its trade secrets.
Principal Contractual Techniques
A wide variety of contracting techniques can be used to protect an enterprise’s trade secrets. The most common are contractual provisions whereby the employee promises not to use or disclose the trade secrets of the enterprise.
There are two ways to treat the issue. One is a simple agreement by which the employee recognizes that, as a consequence of his or her employment, he or she will have access to the employer’s trade secrets, that they are valuable and provide to the employer a competitive edge, and that the employee will not use or disclose the trade secrets of the employer either during or after employment. Such a provision is typically in an agreement that also addresses assignment of inventions and other matters. Another and more comprehensive approach imposes restrictions on post-employment competitive activity for a reasonable period of time, within a reasonable territory and a defined scope of activity.
Safeguarding Trade Secrets with New Hires
A prospective new hire could be asked whether or not the employee is subject to restrictions, such as a restrictive covenant with the former employer, on entering into the activity being offered. The prospective new hire could also be asked whether or not the proposed activity with a new employer places a former employer’s trade secrets in jeopardy.
Safeguarding Trade Secrets with Prospective Employee Bound to Former Employer
Restrictive covenants may be used with employees to protect the company’s legitimate interests, a principal one being an interest in protecting its trade secrets. Many times an individual that one wishes to hire is so bound.
Required Notice of Subsequent Place of Employment
One technique to keep in mind in any form of agreement is a requirement that, when the employee leaves, he or she will be required to advise the first employer of the identity of the next employer, that employer’s address and telephone number, and the proposed activity that the employee will be involved in. Where it is a condition of employment, it should be routinely mentioned to the employee at the time of employment and at the termination interview.
Means of Identifying Trade Secrets
A way of putting employees on notice of trade secret matter is to have a routinized, periodic system in place to do so. Supervisors can be charged with the task of periodically identifying aspects of the company’s information that are regarded as of great competitive value. Additionally, articles may be placed in company internal publications stating the importance of confidentiality and the competitive edge that the company’s trade secrets afford to it.
Securing Documented Information
In addition to the precautions of limiting employee access on a need-to-know basis, locking doors to individual offices where trade secrets are maintained, using locked file cabinets or storage rooms for confidential material, and providing appropriate treatment of trade secrets are also means of securing trade secrets.