What do you do when your business has valuable competitive information that you don’t want a current or former disgruntled employee to share with others? Perhaps you’ve built a valuable customer list over the years, or you have a unique way of pricing your goods or services. Maybe you’ve developed a unique software solution, or you have special deals in place with your vendors. Whatever the information is, if it has economic value precisely because it isn’t known to your competitors or the general public, then it probably qualifies as a trade secret. What should your business be doing to protect such trade secrets?
Confidentiality Agreements
Any employee who has access to proprietary information should be required to sign a confidentiality or non-disclosure agreement. Best practice is to have such agreements in place and signed BEFORE the employee starts working for your company. It should clearly define what is “confidential” and under what circumstances company information can or cannot be disclosed. The agreement should also require an employee to return any confidential information to the company should the employee leave the company. The agreement may also include a provision granting the company the right to let the employee’s next employer know about their confidentiality obligations just to deter the next employer (who is most likely one of your competitors) from taking advantage of your confidential information.
Trade Secret Policies
You should also have a written trade secret policy. It should remind employees not only what a “trade secret” is, but what kinds of information your company considers a trade secret and what steps you have put in place to keep such information secret. Obviously, trade secret information should only be available on a need to know basis. But you should also address practical questions: What information can or cannot be stored in the cloud? Can information be copied from a company computer to an employee’s personal laptop?
Invention Assignment Agreements
Finally, if you have an employee whose job is to create something of value for the business (a software developer, a content writer, etc.), then consider having an invention assignment agreement in place that makes it clear that anything the employee creates during their employment belongs to the company and must be disclosed to the company. This can prevent litigation later over whether a former employee’s “side project” should rightfully belong to the business or to your former employee.
Without such an agreement in place, the courts make a distinction between an employee who was “hired to invent” something new versus an employee who was “hired to improve” an existing product. If an employee was hired to invent, then there is no question that the invention rightfully belongs to the company. But why put the business in an expensive legal battle over whether the employee was merely ‘hired to improve” when you can put an invention assignment agreement in place to minimize the chance of such a fight?
Reach out to my office if you need any help setting up your employee confidentiality agreements and trade secret policies.
