10 Questions to Ask to Better Protect Your Company’s Confidential and Proprietary Information

Warn Employees

Advise employees that in the course of their employment they will be privy to certain confidential information and that they have a legal duty not to use that information for any party other than their employer. Employers should never take for granted that their employees necessarily appreciate that certain data is competitively sensitive and should advise them both orally and in writing of its confidential nature. Such warnings should be specifically referenced in employee policy manuals and, where appropriate, incorporated into written employment agreements.

Limit Access

Limit competitively sensitive information to employees on a need to know basis. Generally speaking, lists of a company’s various customers should not be readily available to all employees — at least not if the company regards the identity of its customers as confidential. Further, access to scientific information involving competitively sensitive processes, designs, and techniques should be restricted to those technical and managerial employees who require such information to carry out their duties. Making such information broadly accessible to employees within the company could make it more difficult to establish that it constitutes a trade secret should litigation arise.

Improve Security

Implement adequate security procedures so that visitors to the company’s operations would have no reason to become privy to confidential information upon visiting the premises. Visitors should be asked to sign in and out and be escorted by a company representative when moving about the premises. During nonbusiness hours, sufficient security measures should be in place to safeguard against unlawful entry and misappropriation of trade secrets.

Limit Certain External Communications

In external communications, make sure that care is taken not to inadvertently divulge trade secrets. For example, if a company publishes the identity of several of its customers in promotional materials, it should realize that by doing so it is running the risk that the identity of its customers generally may no longer be deemed a legally protectable trade secret. While such disclosures may occasionally be necessary for business reasons, they should be kept to an absolute minimum.

Implement Password System

Limit access to sensitive computer-related information through the implementation of a system of passwords that effectively prevents unauthorized access by those employees motivated more by curiosity than a genuine need to know. When employees leave the company, make sure that all passwords that they may have been privy to have been changed so that they can no longer tap into such information.

Execute Noncompete Agreements

Consider having employees sign noncompetition agreements if they are privy to competitively sensitive information in the course of their employment. Such agreements, which restrict an employee’s ability to work for a competitor upon leaving the company, are legally enforceable so long as they are reasonable as to both time and geographic scope. Generally speaking, the length of time restriction should not exceed two years and the geographic restriction should be limited to the employee’s former service area.

Require Nonsolicitation Clauses

As an alternative, an employer can simply require that its employees not solicit either its customers or its other employees should the employee leave its employ and join a competitor. Such restrictions are generally viewed more favorably by the courts insofar as they do not prevent an employee from working in the same industry, but simply preclude that employee from trading upon confidential information that was acquired through his/her prior employment.

Conduct an Exit Interview

Conduct an exit interview with departing employees whenever possible, using the occasion to remind them of their legal obligations to maintain certain information as confidential. Any competitively sensitive information in the possession of the employee should be retrieved at this time, along with copies of any office keys.

Execute Acknowledgments

Where appropriate, have the exiting employee sign a statement expressly acknowledging that he or she has been privy to trade secret information belonging to his or her employer, that the employee recognizes that he or she has a legal duty to maintain that information as confidential and will honor that obligation. Such written statements reinforce the message about the need to safeguard competitively sensitive information and may serve as useful evidence in litigation should the employee breach his or her duties.

Contact Subsequent Employers

Consider advising the employee’s future employer (if it is in the same industry) that the employee has been privy to certain confidential information while in the company’s employ and that such information must not be used to benefit any other employer. Such correspondence will place a subsequent employer on formal notice of the employee’s prior access to competitively sensitive information and may serve as a further basis for a claim against the subsequent employer if it misappropriates any such information for its own benefit.

Protecting competitively sensitive information today is a difficult, but nevertheless vital, task that virtually all companies must address in some fashion. Although the particular measures that should be implemented will vary depending upon the circumstances, the ten points set forth above may provide employers with a general outline of how they should go about protecting their trade secrets.

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