Every organization wants to safeguard trade secrets and proprietary information. It’s your responsibility to make sure employees know that you expect them to do their part by not divulging your intellectual capital. It’s also important to make sure employees don’t take trade secrets with them if they go to work for a competitor.
You have three options to protect your business interests: (1) nondisclosure agreements; (2) noncompete agreements; and (3) simple policy statements explaining what you consider confidential and how you expect employees to treat the information.
What’s at issue
Before deciding which approach to take, consider what you want to protect—and protect against.
• Preventing accidental disclosure: Your customer information and marketing strategies are prized commodities that must be kept secure. You may also have proprietary production methods or research that contribute to your company’s success.
Your best protection against careless leaks is a strong policy that makes it clear to employees that they must treat company information confidentially.
• Stopping intentional misappropriation: This is another matter entirely. Here, you are talking theft, presumably by someone in a position of trust who has access to confidential information.
A nondisclosure agreement may help protect your business from unfair competition by making employees aware of both their legal obligation to protect proprietary information and your intention to use the full force of the law to enforce your policy.
For additional protection, you may want to consider asking key employees to sign a noncompete agreement.
What courts look for
When hearing a lawsuit accusing an employee of misappropriating proprietary information, courts typically want to know if a company is serious about protecting its data.
Is information just lying around where anyone can find it? If so, you’ll have trouble convincing a court that it is a bona fide trade secret. Are those secrets really secret? What you consider a secret, a court may consider general knowledge. Customer lists, for example, are seldom protected. Courts typically accord trade-secret status to lists only if acquiring the customers required extraordinary effort and expense over a period of many years.
So if competitors could use public sources to identify your customers, nondisclosure and noncompete agreements might not matter. A judge might not bar a former employee from joining a competitor and soliciting your customers even if she had signed an agreement.
Other information that is unlikely to meet the judicial definition of “trade secret:” normal financial information, pricing data, operational plans and promotional goals.
Sometimes, simplest is best
For most companies, a simple policy makes more sense than complex nondisclosure and noncompete agreements.
Be sure your policy defines what you consider proprietary or confidential information and offer some examples. Make it clear, however, that the list of examples isn’t exclusive, and that you can amend the policy at any time.
Back up your policy with robust measures to safeguard proprietary information from casual perusal. Provide access only to employees who need it.
The practical advantage of having a confidentiality policy: You are free to discipline anyone who violates it, just as you can with any legitimate policy.
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