Arriving at your office Monday morning, you find this memo from a key employee on your desk:
TO: John Smith
FROM: Jane Doe
RE: New Job Opportunity
I have enjoyed my 10 years working at Plastics Inc., particularly in our product development department. While I have learned much about the research, development, sales and marketing of our products, I was recently offered a position with Polymers Inc. to perform similar duties and functions but with better pay and benefits. I am only taking with me my personal files and some training materials. I wish you the best.
Jane Doe is a star at Plastics and deeply involved with the research and development of a revolutionary and exclusive new product. Her departure will not only delay the introduction of your new product, but you fear her employment by your competitor will permit it to bypass the trial and error Plastics experienced in researching, developing and defining a market plan for this new product.
You suddenly realize there is a substantial threat to your company because you don’t have a noncompetition agreement with Jane Doe. But you recall reading something somewhere about how to stop employees from working for a competitor if their new job necessitates the use of your company’s “trade secrets.”
What are trade secrets?
Unfortunately, simply calling your company’s information a trade secret is not enough. A business must consistently behave in a way that proves its desire to keep information secret, such as using confidentiality agreements with customers, suppliers and employees, restricting access to the information, and marking drawings and other critical business information “confidential.”
The information also must derive economic value from not being generally known by the public. If an item such as a business plan, customer list or manufacturing process is protected, valuable and unique, it is a trade secret, which is eternal as long as it is not revealed. Thus, careful attention is required when disclosing information in advertising, requests for quotes, Web pages or a company prospectus.
Consequence of misuse of trade secrets
If a former employee is using your trade secrets, you have several options. You can seek an injunction through the courts requiring the employee (and new employer) not to use the information. Some courts will prevent former employees from working for a competitor and exploiting knowledge from a previous employer, especially if the new position is similar yet pays considerably more.
You can also seek monetary damages for the actual loss, and may even recover exemplary damages and attorneys’ fees.
Another option is to persuade the Department of Justice to pursue an action against the individual under the Economic Espionage Act of 1996, which makes it a crime for any person to take a trade secret for his or her benefit or the benefit of others knowing that the offense will injure the owner of the trade secret. It is also a federal crime to receive or buy trade secrets without the trade secret owner’s authorization.
What can you do?
You can stop an employee from using your trade secrets only if the business information is properly protected under trade secret laws. Doing so prevents employees from setting up their own directly competitive business or from becoming an employee of your toughest competitor.
Moreover, if the proprietary information remains unique, valuable and protected, it can remain a trade secret for decades with no geographical limitation. Make the effort now to protect your trade secrets – it’s too late when a competitor obtains and uses your valuable trade secrets against you, thereby stealing your customers, technology base and business information.
As for Jane Doe? Draft an e-mail to your boss suggesting an urgent meeting to discuss the situation and ways to protect your trade secrets in the future.
Alan Rothenbuecher is a partner with Brouse McDowell. Reach him at (330) 535-5711 or [email protected].
