United States: New Year's Resolutions For Companies Seeking To Protect Their Trade Secrets In 2015

Last Updated: January 17 2015
Article by James H. McQuade

The start of a new year is a perfect opportunity to set lofty goals of self-improvement. While the odds of completing a New Year's resolution aren't exactly inspiring (over half are expected to fail within six months) studies still show that people who make specific resolutions are more likely to achieve their goals than those who don't. The payout for making a specific plan (particularly when it comes to protecting trade secrets) can be quite rewarding.

Looking back to 2014, Trade Secrets Watch published many articles relating to costly (and, perhaps, avoidable) trade secret litigation. 2015 can be different. It can be a year of greater trade secret protection and lower litigation costs. Set forth below are several potential New Year's resolutions for companies seeking to protect their trade secrets:

  • Use Confidentiality Agreements. Companies should require their employees and third parties who have access to trade secrets to sign confidentiality and non-disclosure agreements. Employers also should include confidentiality and non-disclosure provisions in employee handbooks, codes of conduct, and other company policies.
  • Consider Post-Employment Restrictive Covenants. Companies may want to consider requiring their employees to sign agreements containing post-employment restrictive covenants designed to prevent their former employees from using or disclosing their trade secrets, including such restrictive covenants as non-compete provisions, customer non-solicitation provisions, and employee non-solicitation provisions. Companies must carefully consider applicable state law when drafting restrictive covenants, as some states (notably California) generally disallow them.
  • Limit Access to Trade Secrets to a Select Few. Companies should limit their employees' access to their trade secrets to a "need to know" basis. This can be accomplished through many avenues, including key-lock entries, computer passwords, and limited access to electronic information.
  • Adopt Adequate Electronic Use Policies. Companies should consider adopting electronic use policies that are designed to prevent their employees from copying and taking confidential and proprietary electronic information, including prohibiting employees' from using their company-issued computers to access their personal email accounts, websites that provide cloud-based storage services, and external storage devices.
  • Train Employees. Companies should train and retrain their employees on their relevant practices and policies relating to the protection of trade secrets.
  • Use Data Theft Prevention Technologies. There are a number of data loss prevention software products that are commercially available today. These products are designed to monitor, protect, and manage companies' confidential information and many have found these products to be very effective in preventing theft of data and trade secrets.
  • Conduct and Document Exit Interviews. The exit interview presents a perfect opportunity to remind employees of their confidentiality duties and other post-employment obligations, to answer any questions employees may have concerning those obligations, and to obtain the employees' agreement to continue to honor those obligations. The exit interview also offers employers an appropriate opportunity to recover all of their confidential and proprietary information. The exit interview can also be used to discover information about employees' new positions with their new employers and to evaluate the risk of misappropriation of trade secrets in light of the employee's new role.
  • Conduct Forensic Examinations. If the risk of misappropriation of trade secrets appears to be high with respect to a particular employee, companies should consider engaging a qualified computer forensic expert to conduct an examination of the employee's computer and to search for evidence of misappropriation. Such an examination can often reveal compelling evidence of trade secret misappropriation that would not otherwise be discoverable to an ordinary user.
  • Follow Up. Companies should send follow-up letters to their employees and, in appropriate cases, to their new employers reminding employees of their continuing obligations to comply with all of their applicable post-employment restrictive covenants.
  • Get Lucky. Sometimes in business, as in life, when all else fails, it's downright necessary to have luck on your side. Take, for example, the story of Yu Long, a former employee of United Technologies Corporation, who was arrested this past November for attempting to take sensitive information relating to military aerospace programs outside the United States. The confidential documents were purportedly found in Long's checked baggage, during a layover, as Long was about to take himself (and military-related secrets) out of the country.

And with that, let's toast to 2015—may it be full of happiness, health, and protection for trade secrets!

Twitter: @TS_Watch

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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