Consider this scenario: Your company is a mid-sized business with significant R&D expenditures. As the result of years of development efforts, your company has garnered a substantial portfolio of valuable formulas and materials processes, all of which are particularly difficult to re-engineer. Bottom line – your company has a portfolio of valuable intellectual property in the form of multiple trade secrets.
Protecting these trade secrets is a series of measures implemented over the years and now embodied in a “confidentiality policy”that includes:
- Documents should be labeled “confidential and propriety”;
- All employment agreements have nondisclosure provisions;
- All documentation relating to the trade secrets are supposed to be restricted to use in a defined set of secure rooms and/ or through limited password protected computer access.
Upon examination, you realize the policy is not only thin, but also that none of these requirements are being rigorously followed. What to do?
The current situation places the company’s trade secrets in jeopardy, should it ever attempt to enforce its intellectual property rights against a departing employee intending to use those trade secrets with his or her new employer. Because the laws protecting trade secrets require that the information be “secret” and that reasonable steps be followed to maintain that “secrecy,” one of the threshold issues to be addressed will be how “secret” the former employer is treating that information. Therefore, because our example reveals a company that is rather complacent in protecting its trade secrets from disclosure, a court may well rule that the information is not a trade secret and, thus, not protectable.
To avoid possible litigation traps going forward, remedial actions should be implemented immediately. Here are the steps to consider:
Step One — Revise the company’s policy to include:
- controls over the copying of these materials (both on paper and electronically);
- controls over the access to these materials by specifically identified persons;
- controls over the media by which copies of the materials are permitted;
- controls over the extent to which these materials can be distributed or handled (e.g., whether copies be taken home overnight by permitted employees); and
- the new policies in the confidentiality agreements and implementation of mandatory exit interviews for all departing employees to reaffirm the importance of the trade secrets and the security measures applicable to them.
Step Two — Conduct orientation sessions for all employees that:
- inform them of the importance of the company’s trade secrets and the security measures relating to them (as outlined in the new policy, which should be incorporated into the company’s employee handbook); and
- at the end of each session, have all attendees acknowledge receipt of the new policy in writing (the goal being universal distribution and knowledge of the policy).
Step Three — Implement a monitoring program to periodically:
- assure that the policy is being applied universally (via spot check and system audit); and
- review the policy to upgrade it as necessary to ensure its continued effectiveness and coverage.
Even though the company’s current approach leaves it open to attack in the face of current litigation, its immediate action to remedy those defects and to eliminate them going forward will place it in a stronger position to protect the intellectual property that might be the target of departing employees and the subject of future litigation.