Protecting Company Secrets: Employee Confidentiality Agreements and Trade Secret Policies

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. Such an agreement or provision should clearly define what is considered “confidential” and under what circumstances company information can or cannot be disclosed. For example, information that has legally been made public (without violating a confidentiality agreement) cannot be protected because it is already out there. The agreement should also require an employee to return any confidential information to the company should the employee leave the company. Sometimes, we even go so far as to 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.

Best practice is to have confidentiality and non-disclosure agreements in place BEFORE an employee begins working for the business.

Trade Secret Policies

Just like other policies contained in your employee handbook, 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. (Hint: This is an incredibly helpful piece of evidence to have should we ever need to sue to stop a former employee from using your company trade secrets.) 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?

Have you identified your company's trade secrets?
What steps are you taking to keep them secret?

Invention Assignment Agreements

Finally, if you have an employee whose job is to create something of value for the business (a software developer, a product engineer, 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. The purpose of such an agreement is to avoid a fight later over whether a former employee’s alleged 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?

Why put your business in an expensive legal battle over who owns what when you can use invention assignment agreements?

If your business has valuable information to protect, then schedule your initial consultation today to put a plan in place.

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