Theft of Trade Secrets: Can You Stop It?

One unhappy former employee could mean nightmares for your company. Learn how to protect your secrets.


Document Management
In addition to the steps already mentioned, consider implementing a document management program. This should include a valid document retention policy that outlines what documents are kept and for how long. Documents that are no longer needed should be deleted and hard copies shredded. A restriction should be set as to how many copies of a particular document or file can be created. This policy should include a prohibition on the e-mailing of trade secrets to electronic distribution lists. As with all other policies, mechanisms should be implemented to enforce these policies and consequences should be outlined for non-compliance.

Other methods of protecting documents include developing a series of policies addressing trade secrets, including non-disclosure, non-solicitation, non-recruitment and non-compete agreements.

A non-disclosure agreement basically binds an employee to not disclose trade secret information during and for a specified time after employment. This agreement should be signed when an employee begins employment and should be addressed with the employee during the exit interview.

A non-solicitation agreement forbids an employee to solicit business from current clients for a specified time period if they work for a competitor. Competitors may try to avoid conflicts by assigning new sales territories to people that come to work for them. On the surface this looks like a willingness to adhere to the non-solicitation agreement, but in reality, there is nothing to stop the new salesperson from sharing specific information about their old territory and their old clients with the new company.

Another beneficial policy is a non-recruitment policy (sometimes called a non-solicitation of employees policy). This policy prohibits former employees from actively recruiting employees from his previous employer. This type of policy can help prevent the wholesale departure of a particular department.

A non-compete agreement specifically prohibits an employee from working for the competition for a specified period of time. Non-compete agreements can sometimes be difficult to enforce, because the courts argue that employers do not have the right to prevent former employees from earning a living. Another interesting point is that even if a former employee promises not to disclose proprietary or confidential information to his new employer, it is possible to argue that there will be an inevitable disclosure of confidential information on the part of the employee. This inevitable disclosure doctrine may be the point needed to prevent proprietary information from falling into the competition's hands. To learn more about inevitable disclosure, research the case of PepsiCo Inc. v. Redmond. For additional information on how these policies can help protect trade secrets, go to www.findlaw.com and conduct a search on the term "trade secrets."

Once these policies are in place, a periodic review should be established. All too often companies keep their policies in a dust-covered tome and only refer to them during a crisis. Keeping employees fully aware of the policies covering trade secrets and proprietary information will help reduce the risk of losing trade secrets and can be a valuable tool should you find yourself legally pursuing someone in violation.

The theft of trade secrets is a significant issue for any business. Because information can now be disseminated with the click of a mouse, and it often falls outside the scope of many security measures currently in place, the problem can only get worse. Now is the time to put mechanisms in place to reduce this vulnerability.

John Mallery is chief technology officer for Clarence M. Kelley and Associates Inc., a private investigation firm headquartered in Kansas City, Mo. He manages the firm's technical service offerings, network security consulting and computer forensics. John can be reached at jmallery@cmka.com .