Maintaining the integrity of confidential proprietary information is critical to the success of any business. But the issue raises many questions in business owners’ minds. They wonder, for example, what constitutes “confidential proprietary information” and from whom they should protect it. The answers to the questions vary, but the reasons for it do not. The most significant answers are clear: protecting what are regarded as corporate secrets strengthens a company’s competitive advantage, protects its assets, and enhances its financial position.
Smart Business spoke with Dale Mellencamp, a partner at Godwin Pappas Langley Ronquillo LLP, to get some insights into protecting certain corporate information.
Why should clients be concerned with protecting confidential information?
Due to technical advances, vast amounts of confidential proprietary information can be replicated and stored on CDs, diskettes or flash drives. Such information can also be instantaneously transmitted as attachments to e-mail. In short, information has become more susceptible to intentional or accidental transmittal or removal from company offices or equipment. These developments increase the likelihood that a company’s carefully developed designs, plans, models and research will be obtained and used by the competition.
It is imperative that businesses regularly evaluate and improve their methods of protecting such information. Misappropriation often occurs as a result of disclosure by employees planning to leave the company or former employees who still possess or have access to the information.
Do former or current employees have responsibilities regarding the protection of proprietary information?
Yes. Employees are not entitled to give proprietary information to their new employers, even for their own purposes. Employers should do everything they can to make sure that when an employee is hired he is aware of such obligations. These obligations should be addressed in employment agreements and employment manuals and policy handbooks. Bulletin board reminders might be considered, and departing employees should be reminded of their obligations not to disclose or misappropriate proprietary information. Employers should address this in exit interviews and should require the return of all access codes, cards, laptops, CDs and other forms of confidential information before the employee leaves. Employers should try to obtain a signed statement that the employee has returned all proprietary information.
What constitutes confidential proprietary information?
Absent an agreement, protected information is often limited to that which constitutes a trade secret. A key to being considered a trade secret is the owner’s efforts to maintain the secrecy of such information.
An employer can protect the secrecy of proprietary information that may not be considered a trade secret if it requires the new employee to sign an enforceable agreement and takes the appropriate steps to maintain the confidentiality of such information. The information does not have to be patented or protected by copyright to be protected from misuse.
Of what significant elements of confidential proprietary information should companies be aware?
Proprietary information that can be protected generally includes information or data that is not generally known or accessible, and which gives the owner a competitive advantage. Such information is often developed over years with an investment of significant time and resources and is often accessible to a number of employees.
But the company must use reasonable care to maintain the secrecy of such information. If the company has not made reasonable efforts to maintain confidentiality, courts will be far less likely to enforce agreements or apply statutes that might otherwise prohibit disclosure or use of such information.
What benefits do clients derive from working with attorneys to protect their ‘secrets’?
While businesses are generally aware of their most vital secrets, they may not appreciate the extent and value of various procedures, policies, databases or practices until such information is misappropriated and used by a competitor. Attorneys can help businesses identify and protect such information.
Clients should involve counsel in the process before information has been placed at jeopardy. All employment agreements should be prepared by counsel who are aware of the requirements for enforceable agreements. Counsel can help develop procedures for exit interviews and retrieval of any information when employment is terminated. They can also provide advice regarding proper methods of monitoring or inspecting e-mails and hard drives to identify improper electronic duplication and transmittals. Counsel can also help determine the types of information that are likely to be considered worthy of protection by the courts.
DALE MELLENCAMP is a partner with Godwin Pappas Langley Ronquillo LLP in the Houston office. Reach him at (713) 425-7406.