Business Counselor April 17, 2014 Kimberly M. Large

Employers Take Care: Are You Protecting Your Valuable Trade Secrets and Copyrighted Material In Your Contracts?

Every employer should protect its valuable information from the threat of theft by trusted individuals by using well-crafted contracts and employee handbooks. Theft of company technology is an increasing problem. In addition, outsourcing and use of contractors is on the rise, as is the rampant use of social media and the Internet by employees. Cloud computing is raising the specter of data breaches as well. On top of that, information may be copied and shared very easily, and the majority of trade secrets are taken and then disclosed (sometimes carelessly, and sometimes intentionally) by trusted vendors and employees.

All too often, companies are tempted to use a very basic agreement to protect confidential information, or they simply skip using any agreement and trust nothing will happen to them. Don’t take unnecessary risk with your company’s valuable information. Whether an employer’s main concern is restricting its employee from future unlawful competition or preventing a vendor or employee from soliciting its customers, appropriate contractual protections for the company’s sensitive information are critical.

So, what are trade secrets, and why should they be protected? Although a simple definition, a trade secret is information (such as a technique, formula, process, etc.) that has economic value from being secret (not publically known) and is and has been the subject of reasonable efforts to keep it secret. Trade secrets might be strategies and development plans, analyses and designs/prototypes, and a vast array of other things.

A copyright is protection given to an author of original work (which might range from artistic to musical to other things), that usually allows the author the exclusive right to reproduce, display or distribute the copyrighted work. These intellectual property rights may also be at risk from employees or vendors who seek to profit by exploiting a company’s copyrighted materials.

Contracts addressing intellectual property and trade secrets are particularly critical for key employees or any outside parties who have access to or are receiving your company’s sensitive information. Use an employee handbook and talk to counsel about suggested language to include to protect trade secrets and intellectual property. There are many situations where you will also want to safeguard your company’s intellectual property and trade secrets by contract. For example, use these provisions in contracts:

  • with key employees who have access to or develop intellectual property or trade secrets (particularly on hiring, but also during employment), or
  • if your company has any of its work performed by outside vendors or independent contractors, or
  • if your company is buying or selling a new division, or merging with another company or being acquired, etc.

When these provisions are addressed by contract, everyone is on the same page about what information is critical to the company to safeguard, and your employee/vendor/outside party can even assist you in protecting the information. If information is later taken, it is often easier to get legal relief, particularly if your contract includes the right to seek an immediate order from a court to stop the use or loss of information. Contact counsel to draft an appropriate agreement that protects your valuable information and rights, and to discuss tips for when and how to utilize these protections to avoid costly risks of loss to your company.

Let’s start a partnership worth keeping.