A trade secret is a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information that is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors. Many businesses survive on their ability to keep their trade secrets, well, secret. For this reason, ensuring that confidential information stays within the company is crucial, and protecting trade secrets from employee theft needs to be a high priority. To ensure the safekeeping of confidential information, employers need to reiterate employee obligations regularly, including during onboarding and exit interviews, and have a plan of action for responding to insider breaches of trust.
Trade secrets are particularly susceptible to theft because of their intrinsic economic value. Perhaps surprisingly, employees, not outsiders, pose the greatest threat of loss from trade secret theft as employees often find the quick potential profit too tempting to leave behind when changing jobs, or when seeking new employment. So what’s an employer to do?
Obtaining legal protection is not always that simple. Absent a few exceptions, non-compete agreements are prohibited under Business and Professions Code § 16600, meaning an employer needs to get creative and ensure that it has taken “efforts reasonable under the circumstances” (per California Uniform Trade Secrets Act) to maintain the secrecy of the information it claims to be a trade secret. Furthermore, employers have hopefully placed confidential and trade secret protection provisions in their employment agreements. And hopefully these agreements have been updated to comply with recently enacted legislation and important employee/whistleblower notification provisions. Discuss these issues with experienced legal counsel.
Two areas that are often susceptible to leaks are social media and exit interviews. Indeed, most trade secret theft occurs via electronic device. Make sure your employee handbook takes this into consideration with thoughtfully and thoroughly drafted policies around social media, network, and device usage. Second, when conducting exit interviews, note that the higher an employee is in the corporate hierarchy the greater the threat that that employee will expose company confidential information. Prepare accordingly.
With best practices for protecting confidential information, including trade secrets, in place, your company will be free to focus on growth and development. Contact experienced trade secret lawyer Drew E. Pomerance today to discuss.