How to Prevent Disputes With Former Employees Over Trade Secrets

Category: Employment Law

A company’s intellectual property can include some of its most precious assets.  When an employee leaves, particularly for a competitor, your company can be vulnerable to the loss of those assets.  What’s more, ownership of IP, trade secrets and other confidential company information can be a murky area under the law.  While a framework exists under the Uniform Trade Secrets Act, some states, including New York, apply their own interpretations of the act.  But there are steps that you can take to protect your company from harm, and reduce the chances of conflict:

1.  An ounce of prevention: Set forth clear terms about what will be considered a trade secret in the initial employment agreement.  Some states make it very difficult for employers to hang on to IP unless these terms are in the original agreement.

2.  Consider including a non-compete:  A non-compete included in the employment agreement can come in handy in the event of an employee departure to a competitor.  To learn more about how CASTAYBERT PLLC can help you with non-competes, click here.

3.  It’s never too early:  Depending on the nature of your business, it may make sense to ask even  prospective employees to sign non-disclosure agreements during the interview and hiring phase, in the event that you find you have to share confidential information at that time.

4.  Be clear:  A good IP terms and conditions agreement makes it clear to everyone that anything that was worked on in connection with work done at the company should be assigned to the company, not the employee.  This is particularly important, since some states do not have a codified invention statute.

5.  Start with your employee handbook:  Even if your company is not primarily IP-centered, you should have a company-wide policy, explained in your company handbook.  In some cases, this may suffice to cover your non-disclosure needs.  In any event, this is a great place to start.

6.  Who should sign?  Any employee or outside vendor or other business partner who might come in contact with sensitive information should sign such an agreement.

7.  Know what’s yours and what’s not:  At the outset of employment, a confidentiality and assignment of inventions agreement allows employees to identify prior inventions or other IP.  Read the list carefully, so that, in the event the employee leaves, you know what was already theirs.

8.  The exit interview:  This is an opportunity to go over your expectations of protection.  This is also an opportunity to remind the departing employee of their obligations by showing them a copy of the confidentiality agreement that they originally signed.

9.  Put it in writing:  You may want to put your expectations of protection in writing and communicate them to the new company.  The non-compete in the original employment agreement will serve to reinforce this.

10. Take precautions before departure:  In some cases, if you feel it is necessary, you may want to monitor email communications from the departing employee and restrict their copying privileges.



Disclaimer: This article is intended for informational and educational purposes only. Because of the generality of this article, the information it provides may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. 

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