Workplace Confidential: Preventing Former Employees from Using Your Trade Secrets

Most trade secret cases involve allegations that a former employee is using a company’s confidential information at a new job or their own business. Given that reality, and the workforce disruptions caused by the coronavirus pandemic, it’s vital for companies to safeguard their trade secrets before and after employees leave.

Reasonable protective measures, such as clearly labeling trade secrets, training employees on confidentiality policies, and limiting access to secret information, are important to support future trade secret misappropriation claims. These defensive actions can be applied to all types of trade secrets — including customer lists, pricing information, source code, business strategies, and manufacturing processes —  but doing nothing exposes a company to arguments that unprotected information was not truly a trade secret. Another key protective step is having employees with critical knowledge sign non-compete agreements, as a condition of employment or for receiving severance pay, in order to keep them from working for a rival or starting a competing business, usually for a year or two.

If a company discovers that an ex-employee is using its confidential information in a new place of work, it can file state and federal litigation at the same time under a 2016 federal law known as the Defend Trade Secrets Act (DTSA). Both options allow companies to seek a court order to stop the unlawful activity and potentially receive damages. Depending on the law of the state in which a federal court sits, a company alleging trade secret misappropriation may be able to utilize the “inevitable disclosure” doctrine and argue that the former worker would be unable to perform the new job without relying on trade secrets learned in the prior position.

Combining a proactive approach to shielding trade secrets with the strategic use of litigation when they are misappropriated enables companies to defend their most vital confidential information.

The next blog posting in our series on trade secrets will discuss how to curtail trade secret theft by business partners.

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