Protecting a Company from Misappropriation of Trade Secrets

Protecting a Company from Misappropriation of Trade Secrets

A trade secret can be any formula, pattern, compilation, program, device, method, process, or collection of information used in a business which derives independent economic value from not being generally known or readily ascertainable to others outside of the business organization.  When someone privy to a trade secret chooses to divulge information, a company must deal with the fallout by developing new procedures, replacing employees, or otherwise making substantial organizational changes.

On the other hand, a company could preemptively build in protection of trade secrets that would disincentivize the dissemination of confidential internal operations.

What Steps can Companies Take to Protect Trade Secrets?

Trade secret protection is possible for any ideas or information that provide a competitive edge to your business. A company must carefully define what their trade secrets are in order to begin protecting them.  Unless employees understand that the information is a protected secret, they may not understand the importance of keeping it confidential.

Written Policy

In order to be better protected, it is prudent to have a written Trade Secret Protection Policy. Such a document will instruct employees on how to identify and protect the company’s trade secrets, and it will convey a company’s dedication to trade secret protection – an important element in litigation.

Training and Continuing Confidentiality

Ensuring employee understanding of a company’s trade secret policy is critical. To aid in that endeavor, holding regular trainings on employee expectations as they relate to keeping trade secrets is beneficial. In addition to training, when an employee is leaving the company, during the exit interview, it is important to include a discussion of the confidentiality of trade secrets; and a company might consider asking the exiting employee to sign a document noting the continuing duty of confidentiality.

Document Designation

A company should use a uniform method for identifying secret documents. Without a clear coding system, a company may have trouble proving a document was illegally disclosed.  Some things a company may consider including on documents detailing trade secrets are a “confidential” watermark or stamp, the company’s name or logo, and/or specific language stating that “this document contains trade secrets.”  If litigation ensues, it will be important to show how the company differentiates between routine business information and confidential trade secrets.

What Remedy can a Company Take Against an Employee Who Shares Secrets?

If an employee purposefully steals and distributes trade secrets, a company may sue that employee for damages incurred as a result of the disclosure. The Economic Espionage Act of 1996 makes it a federal crime to steal trade secrets, particularly to benefit a foreign government, agent, or instrumentality. Additionally, the Uniform Trade Secrets Act (UTSA) allows businesses to sue in civil court for misappropriation of trade secrets, and supplants prior, often inconsistent, common law remedies.

To prove misappropriation, the employer must show that the trade secrets were taken improperly and that they were in fact disclosed. Clearly, if an employee physically steals a confidential file, then the data was acquired by improper means, but reciting knowledge from memory may also be considered improper when proving misappropriation in certain situations.

If the company’s misappropriation suit is successful, a court could order an injunction requiring the defendant to stop using the trade secrets, to pay the company monetary damages, and to disgorge profits. If you believe your trade secrets have been compromised, contact an attorney specializing in business law immediately.


2021-04-27T13:31:39-05:00May 31st, 2019|Business Law, Business Litigation|
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