By: Dunlap Bennett & Ludwig [2/8/22]

Given the dire consequences a company can face once its valuable trade secrets are disclosed to competitors, companies must increasingly take steps to protect their trade secrets in order to remain competitive. Failure to do so may result in the loss of critical intellectual property assets, ranging from key customers (and related buying patterns, preferences, and contact information) to confidential research and development techniques and competitively sensitive manufacturing processes that could eliminate a company’s edge in the marketplace.

Most businesses today have a general idea of what constitutes a trade secret. Generally speaking, a trade secret is any information that derives independent economic value from not being generally known to the public. Under federal law, and in nearly every state, such information must also be the subject of reasonable efforts to maintain its secrecy. Examples of legally protectable trade secrets include:

  • Technical information or know-how.
  • Internal business information, including marketing and finance strategies.
  • Customer lists, software, computer programs, and source code.
  • Formulas.
  • External business information on, for example, suppliers and competitors.  

Although most companies recognize that they possess various forms of trade secrets, many lack a clear understanding of the necessary steps to safeguard such data. The trade secrets lawyer group at Dunlap Bennett & Ludwig can counsel and work with businesses to make sure that information is protected. The following is a list of steps companies can take to protect their competitive intelligence.

Warn Employees and Third Parties

Advise employees that in the course of their employment, they will be privy to certain confidential information and have a legal duty not to use that information for any party other than their employer. Such provisions should be specifically referenced in employment contracts (including nondisclosure agreements and proprietary information and inventions assignment agreements), policies, and employee handbooks. Capture how any given employee will interact with confidential documents in a formal policy. Ensure employees are familiar with the policy by obtaining signed employee acknowledgments of trade secrets and confidential treatment and conducting new employee orientation and continuing education for employees regarding the value of and need to safeguard the company’s trade secrets.

Moreover, while most confidentiality covenants arise in an employment setting, such provisions also have value when a company needs to share elements of a trade secret with individuals outside the company, such as a manufacturer in a supply chain, a customer, or a potential business partner. In these situations, a signed nondisclosure agreement should be obtained from anyone who will have access to trade secret information, and access should be limited to what is absolutely essential.

Limit Access

Access to competitively sensitive information should be restricted to employees on a need-to-know basis. For example, a company that regards the identity of its customers as confidential should not make its customer list readily available to all employees.

Further, access to scientific information involving competitively sensitive processes, designs, and techniques should be restricted to technical and managerial employees who need such information to perform their job duties. To that end, competitively sensitive information should be expressly designated with a legend such as “confidential” or “trade secret—document contains confidential and proprietary information—strictly limit circulation” in a way that unmistakably puts the reader on notice of its unique value to the company.

Implement Physical and Electronic Access Restrictions

Adequate security procedures should be implemented to ensure that visitors to the company’s operations are not privy to confidential information. Visitors should be asked to sign in and out and escorted by a company representative when moving about the premises. Additional security measures include security clearance, badges for entry/office access, keys to access locked information, and cameras to record on-site activity.

Access to sensitive computer-related information should be limited through passwords, and remote access should be set so that automatic logout occurs after a certain period of inactivity. Consider minimizing the risk of a data breach on employees’ personal devices by implementing a policy allowing the company to manage employees’ mobile devices through software that allows the company to remote wipe and encrypt all company information on the device if necessary.

Take Action When an Employee Leaves the Company

Upon voluntary or involuntary termination of an employee’s employment, consider making a forensic image of the individual’s computer and emails. All data on the employee’s mobile devices used to access the employer’s trade secrets and other proprietary information should be purged, and any login credentials issued to that employee that would allow access to the employer’s trade secrets and other proprietary information should be deactivated. 

Whenever possible, conduct exit interviews with departing employees to remind them of their legal obligation to maintain certain information as confidential. Where appropriate, have the exiting employee sign a statement expressly acknowledging that they have been privy to trade secret information belonging to their employer, that they recognize they have a legal duty to maintain that information as confidential, and that they will honor that obligation.

Any competitively sensitive information in the employee’s possession should be retrieved at this time, along with company-issued electronic devices, office keys, and access badges.

Protecting competitively sensitive information today is a difficult but vital task that virtually all companies must address in some fashion. Although the particular measures that should be implemented will vary depending on the circumstances, the points set forth above may provide companies with a general guide of how they should go about protecting their confidential information and trade secrets. And in the event such information does end up being disclosed, following these basic precepts may strengthen a company’s hand in any litigation resulting from the disclosure. Our team has helped clients prevent, contain, and even recover from trade secret leaks and disclosures for decades.

Trade secrets are far too important to rely on an inexperienced lawyer to “figure it out.” Contact our team today for reliable, experienced, and efficient trade secrets lawyers.

Learn more about trade secrets here. To learn more about Dunlap Bennett & Ludwig and how we assist you, contact us by calling 800-747-9354 or emailing clientservices@dbllawyers.com.


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Posted in: Intellectual Property

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