At some point, almost every business faces the problem of an employee leaving to start a competing business. But before the worker leaves, he or she takes some things that will be very valuable in the new business — the former employer’s customer lists, marketing plans or other confidential information. A case is a reminder that businesses must take steps to help avoid this problem.
Peter K. worked at a restaurant. He left his job to work for a competing restaurant. Before leaving, Peter copied training manuals and other sensitive documents to use in his new job. Peter’s first employer sued to keep him from using this information. A court ruled that because no reasonable efforts were made to keep the documents secret, they were not subject to protection.
As this case shows, the best time for a business to protect against misuse of its trade secrets is before problems arise. Here are some tips.
- Have employees sign confidentiality agreements. These state the types of secret information the employee will learn and require the employee to use this information only in the course of his or her work. They allow the company to get an injunction stopping the misuse of trade secrets (an injunction can be obtained without a confidentiality agreement, but it’s usually easier to get with such an agreement).
All new employees should be asked to sign confidentiality agreements. It’s also wise to have existing employees sign them. To get them to sign and help make the agreement enforceable, you may want to offer a bonus or other inducement.
- Take measures to keep sensitive information secret. The restaurant lost in the case discussed above because it did not take measures to keep confidential information secret. As such, make it hard to obtain secret information. Label secret documents “confidential.” Keep them in locked cabinets. Limit access to secret information. Make employees return confidential documents when they leave the company.
- Noncompete agreements. These agreements prevent a person from working for or starting a competing business for a certain time and in a stated geographic area. They can help prevent misuse of trade secrets. However, because they are restrictive, it is harder to get courts to uphold them. Some courts uphold only parts, while some states automatically refuse to enforce them.
Following these steps will reduce the risk of your trade secrets being misused. If you suspect an employee is misusing your business’s secrets, seek legal help immediately. Our firm has extensive experience in this area and can provide valuable help. We can advise you about remedies available to stop the misuse, including an injunction and a suit for damages.