Lawsuits involving trade secrets theft have become an almost weekly occurrence. In 2015, Fitbit, Nike, Angie’s List, and Oculus Rift became entangled in high-profile legal battles arising out of former employees and competitors allegedly stealing the companies’ trade secrets such as customer lists, software codes, and design patterns.
Considering the technological progress, with each passing year, more confidential information is stored, shared, and transmitted electronically. At the same time, the number of devices that employees can use to easily and quickly copy and transmit such information is also increasing every year. Given these parallel trends, those companies who have not taken stock of their trade secrets and implemented measures to protect them, are extremely vulnerable to having such secrets stolen by disgruntled employees or aggressive competitors, resulting in an irreversible loss of competitive advantage.
There are simple steps that any business – small or large – can take to minimize the risk of trade secret theft. Here is short list of basic precautions that any company should be undertaking.
- Figure out what trade secrets your business has. What gives you a competitive advantage? Is it a list of repeat customers? Pricing formula? Design patterns? Procedures that your company follows? Business plans? Product development plans? If this information is not publicly available, it most likely qualifies as a trade secret.
- Who has access to your trade secrets? Can all of your employees access the information or is access limited only to key employees or on a “need to know” basis? The less people have access to your trade secrets, the better.
- What systems do you have in place to limit access to trade secrets? Is the information password-protected? Do you have a way of keeping track of who accessed it, when, and for what purpose? Can you lock people out if you discover a security breach? Do you have alarms set for when somebody downloads a large amount of information or uses a personal device to access it? Do you limit physical access via locked doors, thumb-print access or other security measures?
- Do you have a confidentiality policy? Does your employment handbook include a confidentiality policy? Do all of your employees sign the policy?
- Do you provide confidentiality training? If you have a large company, make confidentiality training part of your on-boarding process. If you run a smaller business, explain to employees what you consider confidential business information and how your expect them to treat it.
- Do your employees sign non-disclosure agreements? If not, 2016 should be the year when all of your employees who work with confidential information sign enforceable Non-Disclosure Agreements (NDA).
- Do your vendors, suppliers, joint venture partners, etc., sign non-disclosure agreements? Anybody – and I mean anybody – with whom your company either does business or plans on doing business – who gets access to your company’s confidential information, should be signing a NDA before such information is shared with them.
- When employees leave, do they sign a document stating they’ve complied with the NDA? All key employees should have an exit interview, during which they should reaffirm that they are aware of the NDA obligations and they have complied and intend to comply with them. If an employee refuses to sign such a document, a forensic analysis of his or her devices might be necessary.
- Do you back up devices of the key employees after they leave? For key employees, before recycling their laptops, blackberries, etc. to be used by others, image those devices so that any evidence of confidential information being copied, transmitted or emailed outside the company is preserved for future investigation and, if necessary, litigation.
Make 2016 the year that you proof your business against trade secret theft and ensure that it doesn’t fall victim to unscrupulous employees or unfair competition practices from business rivals.
About the author
Elisaveta "Leiza" Dolghih is a business and employment litigation attorney at Godwin PC in Dallas, Texas. She represents companies and employees in litigation in federal and state courts and arbitration proceedings. She also helps clients resolve business and employment disputes before litigation arises. A significant part of her practice consists of enforcing non-compete agreements and assisting employers in prosecuting misappropriation of trade secrets by former employees and competitors. She can be contacted by email at LDolghih@GodwinLaw.com or by phone at 214.939.4458.