The rise in employee mobility that has occurred in recent years has ushered in a corresponding increase in trade secret theft. While trade secrets have always been vulnerable to targeted data attacks, the problem of trade secret loss is compounded by the adoption of mobile devices for primary business use, the proliferation of social media, the popularization of cloud computing, and the blurring lines between public and private use on work-issued technology. Today’s employers must actively protect their trade secrets and consider additional protective measures in this changing environment. An organization’s trade secrets and proprietary information are among its most valuable assets and often comprise a business’s most crucial competitive advantage. Trade secrets must be guarded carefully because of their vulnerability to theft, particularly when employees leave one company to go work for another.
Under the Uniform Trade Secrets Act (UTSA), adopted by California, and many other states, a trade secret is defined as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that: (a) derives independent economic value from not being generally known by others and is not reasonably and independently ascertainable on one’s own; and (b) is the subject of “reasonable efforts” to maintain its secrecy. The federal Defend Trade Secrets Act (DTSA) has a similar definition. Trade secrets can vary from business to business and can take many different shapes. They generally fall into two broad categories: technical information and business information. An example of technical information that might be protected as a trade secret is a unique product design or software code. An example of business information that might be protected as a trade secret is a company’s customer list containing names, contact information, and details of a company’s customer relationships that are not publicly known and that would be valuable to a competitor if somehow misappropriated.
Managing trade secrets in the age of employee mobility means establishing a trade secrets policy, designing robust processes and employee policies and agreements to establish contractual barriers to trade secret theft, and restricting employee access (both physical and electronic) to trade secrets wherever possible.
Employee Mobility & Trade Secrets: Non-Compete, Non-Solicitation, & Restrictive Covenants
Restrictive covenants—including non-compete, non-solicitation, and non-disclosure agreements—limit the conduct of employees during and after employment ends. Even though certain types of restrictive covenants are not always enforceable in all states and circumstances, employers often use some type of restrictive covenants (depending on their state’s law) to guard against potential harm when an employee separates from the company. There are steps employers can take to increase the efficacy of their restrictive covenants, particularly when companies operate in multiple states. Additionally, employees who are planning to depart a company should review and assess all restrictive covenants they have with previous and current employers. When hiring new employees from competitors, the new company should investigate the new hire’s agreements to safeguard all parties from potential lawsuits.
Employee Mobility & Trade Secrets: Unfair Competition & Unlawful Business Practices
Employers should adopt a proactive strategy for protecting against trade secret theft and unfair business practices. They can conduct trade secret audits to determine what their most important trade secrets are and who should have access to them. Once these trade secrets have been identified, employers can establish policies and procedures to manage the risk posed to trade secrets posed by employees and employee mobility. Revisiting hiring, onboarding, and training procedures can help to remind employees of their obligation to protect company trade secrets. Technological barriers should be established to limit employees’ access to sensitive information. Exit interviews and processes also should be put in place to secure the employers’ confidential information upon employee departures.
Employee Mobility & Trade Secrets: Computer Fraud
Employers and employees may find themselves at odds when employee mobility issues intersect with workplace technology access. It’s common for employers to issue computers and computer access to employees, and equally common for those employees to use those computers for personal purposes. This becomes problematic when an employee decides to leave a company, and the lines between personal and private use may lead to a dispute. If an employer worries that a departing employee accessed proprietary information with the intention to share it with a new employer, lawsuits against the employee and his or her new employer under the UTSA, the DTSA, or the Computer Fraud and Abuse Act (CFAA) may follow. Though the Supreme Court ruled an employee with permissions may access files up to and including his or her last moment on a job, it also reiterated that because no individual is ever permitted to access a computer or computer network without proper permissions under the CFAA, employees may be sued for accessing areas of computers or computer networks they never had permissions to access in the first place. Thus, employers looking to protect against employee computer fraud must place careful limits on the type and amount of employer data employees are allowed to access. Similarly, departing employees must avoid conduct that may lead to claims of computer fraud against themselves and their new employers prior to changing jobs.
Employee Mobility & Trade Secrets: How We Can Help
The employee mobility and trade secrets attorneys at Payne & Fears offer a suite of legal services that protect business assets at the state, regional, and national levels. Protecting trade secrets is accomplished in part by using non-compete, non-solicitation, and restrictive covenants, creating solutions to guard against unlawful business practices, and discouraging the potential for computer fraud. These comprehensive legal solutions combine to protect confidential information, trade secrets, and intellectual property from damage by departing employees or other individuals who want to gain an unfair advantage in the marketplace. Our employee mobility and trade secrets services include:
- Trade secret audits
- Assistance with new employee onboarding procedures and advice regarding best practices to avoid a claim of misappropriation by a prior employer
- Creating employment policies, handbooks, and contracts that discourage trade secret theft
- Crafting usable confidentiality, non-disclosure, non-compete, non-solicitation, and other restrictive covenants
- Adopting litigation-avoidance strategies
- Establishing best practices for hiring, firing, and managing employees to protect intellectual property
- Advice regarding conducting internal investigations into trade secret theft
- Assistance with conducting exit interviews with departing employees
Even when businesses establish comprehensive safeguards against trade secret theft, litigation is sometimes necessary. Our employee mobility and trade secret attorneys handle a broad spectrum of trade secret-related disputes, including cases concerning unlawful business practices and/or unfair competition, the handling of non-competes, non-solicitations, and restrictive covenants, and claims concerning employee-mobility-related computer fraud. We’ve successfully litigated these trade secret cases in jurisdictions at the state and federal level, including cases involving:
- Misappropriation of trade secrets
- Breach of confidentiality agreements or other restrictive covenants
- Unfair competition
- Temporary restraining orders, preliminary and permanent injunctions, declaratory judgments, and other litigation including trials and arbitrations
- Trade secret theft investigations including with forensic experts
- Computer fraud and unfair business practices claims