How employers can avoid trade secret litigation

On Behalf of | Sep 14, 2022 | Trade Secrets |

The subject of trade secret litigation may involve a business’s most secretive business or technical details, which the firm considers essential to its success. Oftentimes, trade secret litigation involves a former employee who shares their company’s confidential information with a new employer.

It may even happen when two businesses form a joint venture and share trade secrets under a non-disclosure agreement. If the partnership ends, one business may not resist the temptation of using the other business’s proprietary information, resulting in a trade secret dispute. To prevent this type of legal challenge, consider adopting these best practices:

Utilize specific details in your agreements

To secure your trade secrets, always ensure that your agreements cover the specific items you wish to protect. You can do this by clarifying the precise data your company wants to secure in confidentiality agreements (without, of course, setting forth in the agreement the trade secret).

Focus on elements like pricing, cost, and collections that reveal client identities and the requirements or preferences of the client. In some cases, the latter are trade secrets but not the identity of the client. Prototypes, budgeting, and sales forecasting information are also crucial. Your company should adjust the scope of secure, confidential information as it updates its intellectual property policies and confidentiality agreements.

Update your business agreements frequently

Be sure to update your business confidentiality agreements as trade secret laws evolve. For instance, over the last few years, there have been some major development in California law as well as the federal Defend Trade Secret Act (DTSA) that significantly impacts every employer.

Adopt reasonable steps to secure your trade secrets

Under the DTSA and the Uniform Trade Secrets Act, you are ultimate responsibility as a business owner to take the necessary steps to protect trade secret information. Some strategies include forming an information protection team, developing employee training, and limiting public access to business data.

Conduct a thorough investigation of departing employees

When an employee with access to trade secrets departs, consider conducting an investigation concentrating on their last few months, in addition to holding an exit interview with the departing employee. You may also try obtaining information about the departing employee’s conduct from existing workers. Note that the nature of the investigation will rely on the situation’s urgency. Consult your legal department for guidance about an investigation. 

Trade secret disputes are typically complicated. Taking reasonable measures to protect your trade secrets is the first step to strengthening your protection.