Protecting Your Business Trade Secrets!
Our roundtable session leader Annabella Bonfa, Trade Secret Attorney at Wellman & Warren, LLP shared her expert advice on Protecting Your Business Trade Secrets at our 2016 Women Owners Summit!
To safeguard your company information, identify company trade secrets first and mark electronic and hard copies “confidential”.
Create written company policies re: confidential information and inform all employees of company policies in employee handbooks – have acknowledgements signed by all employees.
Ensure that employees acknowledge all work generated during office hours is company owned.
Have independent contractors and anyone from the outside who comes in contact with your company’s confidential documents sign a non-disclosure agreement.
Immediately cut off access to passwords and any remote access to information on the cloud.
When an employee leaves your company, immediately cut off access to passwords and any remote access to company information on the cloud.
When an employee leaves, conduct an exit interview of the departing employee (Remind employee of obligations to company/find out where they are going, etc.). Secure return of company property from the employee (phones, computers, etc.).
Safeguard and image a departing employee’s computer with a forensic expert BEFORE any IT person or other person destroys valuable company data.
When hiring employees or sales people from a competitor, do not allow employees from other companies to bring customer lists or other confidential data from old employers to your business.
Have policies in place which reflect your company policy not to accept trades secret data from other outside sources such as other companies, previous employers, etc.
Frequently Asked Questions:
Question 1 Does my company have any “trade secrets”?
Answer 1 Almost all companies have trade secrets. If you have information which is valuable to a competitor and which cannot be easily obtained doing a Google search, such as your company’s detailed customer information, launch dates, buying patterns, marketing plans, you have a trade secret.
Question 2 Is my list of company customers a “trade secrets”?
Answer 2 Maybe. A straight list of the names of companies you service is unlikely to be a trade secret, unless compiling such a list would be difficult. But a list of the names of people who are your contacts, their cell phones, their buying patterns, preferences, a summary of the last 3 years of orders, etc. may very well be a trade secret. The more detailed the information and the more valuable the information is to a competitor, the more likely you have a trade secret.
Question 3 Can I stop my ex-employees from competing against me?
Answer 3 California is a very pro-work and pro-competition state. If an employee leaves and takes no information or data from the company, he has a right to compete against you after he/she leaves the company. But if your ex- employee steals trade secrets from the company and uses inside company information to compete against you, you may be able to prevent them from competing against you. Competition from an ex-employee in itself is not actionable.
Question 4 What do I have to do to preserve my company’s trade secrets?
Answer 4 In the event of litigation, the first thing the court will try to determine is how well you preserved your client’s trade secrets. This usually involves advising employees of what information is a trade secret, limiting access to those employees who need the information and getting the proper documents in place (non-disclosures, employees handbooks, etc.)
Question 5 Should I hire employees from a competing company?
Answer 5 Ex-employees and sales people from competing companies can make very valuable employees. But beware! Make sure they do not take information from their ex-employer and have the sign agreements making your company policies known. Also, find out whether they intend to poach prior clients and make sure they understand how to legally compete against their prior employer.
Question 6 If I leave a company don’t I have the right to take “my clients” with me to my new employer’s business?
Answer 6 Maybe, but it depends on how you do it and many other factors. Many people don’t understand that their “clients” are really their ex-employer’s clients. If you solicit clients while being employed by your old company for your soon-to be new employer you can be sued for breach of fiduciary duty and other causes of action. Also, if you used your old company’s trade secrets to entice clients to leave the company you will find yourself a defendant in a trade secrets case. Get legal advice before “taking clients” from prior employers.
Question 7 What should I avoid doing if I intend to compete against my old company?
Answer 7 Read all documents you signed with your old employer and get legal advice. Don’t do anything which competes against your employer while you are still employed by your old employer. Do not download any company information from your old employer, email it, place it in Dropbox or share it with your new employer. Watch for legal requirements before attempting to contact old clients.
Anabella Bonfa is a litigator with Wellman & Warren LLP and has built a reputation for handling business and partnership disputes, theft of trade secrets, and unfair competition. She lectures extensively on trade secrets, networking, and using social media to develop business. Ms. Bonfa has the distinction of being the author of the top read CEB (Continuing Education of the Bar) blog articles in 2014 and 2015.
She is the recipient of the 2016 Orange County Women of Influence Awards, Women’s Advocate of the Year Award and Rotary District 5320’s Rotarian of the Year Award 2016.
Be sure to save the date for the 2017 Women Owners Summit:
Thursday, July 27th in San Diego!