Don't Let Your Employees Trade Your Trade Secrets

30 September 2019 Labor & Employment Law Perspectives Blog
Author(s): Jonathan Michael Thomas

Earlier this week, the U.S. Department of Justice (DOJ) warned that there has been a dramatic rise in trade secret theft. The DOJ points to China as the primary sponsor of such trade secret theft. Speaking with CNBC, U.S. Deputy Assistant Attorney General Adam Hickey stated that supply chain and telecommunication companies are prime targets of foreign governments seeking to improve their own industrial knowledge. China in particular has launched a “Made in China 2025” campaign in which it is seeking to become a dominant global high-tech manufacturer, and has, therefore, created an environment that rewards theft of intellectual property. 

While the Chinese threat garners news headlines, employers face a less existential, but nonetheless critical, threat to their trade secrets and other intellectual property: their own employees. And the concern is not just employees who wish to steal their employer’s trade secrets for their own purposes, such as creating a competing business venture. Employees can jeopardize their employer’s trade secrets merely by being lackadaisical in protecting such secrets. 

Courts place the burden on employers to use “reasonable measures” to protect their trade secrets. There is no bright-line rule on whether a particular measure is reasonable. Generally speaking, however, employers should use a heightened standard of protection for their trade secrets, rather than the normal business practices companies use to protect data that is merely confidential. 

The following are eight tips employers can use to better protect their trade secrets:

  1. Update nondisclosure agreements – make sure your agreements sufficiently identify the trade secrets that employees are required to maintain.

  2. Limit access to trade secrets – true trade secrets should be on a need-to-know basis

  3. Monitor access to trade secret repositories – employers must monitor electronic databases and other storage repositories containing trade secrets so that only designated individuals have access to trade secrets. 

  4. Cybersecurity – make sure that you have up-to-date cybersecurity for electronic resources. Cyber threats are ever-evolving, so your security should be routinely updated.

  5. Limit remote access to trade secrets – your cybersecurity is likely stronger at your office. It is often easier to hack an employee’s phone or computer when he or she is logged into a public network. Therefore, limiting remote access to your trade secrets provides an added level of security.

  6. Train and retrain employees – the best cybersecurity in the world will not protect a trade secret from a careless employee. Train employees not only on what is confidential, but also on how to maintain the confidentiality of trade secrets.

  7. Limit access to vendors – vendors should have very limited access to trade secrets. There should also be confidentiality agreements in place to maintain the secrecy of any trade secrets that must be disclosed to vendors. 

  8. Review employee termination procedures – once an employee resigns or is terminated, his or her access to any company information, especially trade secret information, must be immediately terminated. 

Employers must be vigilant in the protection of their trade secrets. Once a trade secret has been disclosed, it is difficult, if not impossible, to resurrect the secret. Therefore, it is important to make sure trade secrets are adequately protected on the front end. As Hickey stated, “If you are looking for a smoking gun and you wait for it, you might end up with a gunshot [wound].” 

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