Preventing misappropriation of trade secrets as an HR

varsha sarkar

August 29, 2023

8:40 am

Non-disclosure agreements are the most common methods for preventing the theft of trade secrets. After the Federal Trade Commission (FTC) proposed a regulation banning non-compete agreements on January 5, employers can still use them but only if nondisclosure agreements aren’t drafted too broadly.

According to Steve Blonder, an attorney with Much in Chicago, a trade secret is simply information used in a company’s operations that is unknown to or not easily accessible to rivals, that is protected from disclosure through reasonable efforts to maintain its secrecy, and that either offers a competitive advantage in the market or has commercial value.

The FTC should ensure that its proposal distinguishes between agreements designed to restrict labour market mobility and those designed to preserve confidential information, according to the Society for Human Resource Management (SHRM).

However, recent court judgments like Turret Labs USA, Inc. v. Cargo Sprint, LLC have hammered home the following lesson: physical, digital, and legal protection creates the chain that gets you from confidential knowledge to trade secrets. The law of trade secrets is fast expanding at the federal level.

Understanding trade secrets and security measures provided by training

Combining these agreements with an effective awareness and training program offers the strongest protection against trade secret theft. This isn’t done very often, according to Unikel. Most employees who steal confidential information do it unintentionally; they simply are unaware that the material is protected. When we suggest that businesses establish policies, Unikel says, “Often times they seem to get a low priority until the companies have a big suit like General Motors.”

The safeguarding of a company’s confidential information is mostly the responsibility of HR. The procedure is as follows:

Write it down

Ensure that each employee signs an enforceable employment contract.

The majority of businesses that have access to trade secrets impose an employment agreement as a requirement on new hires. Non-solicitation and non-compete terms are frequently included in these agreements. These contracts need to be valid and compliant with state law.

Work with your legal team to make sure that any workers who have access to trade secrets have signed employment contracts that adhere to the trade secrets laws in your state. If you have employment contracts that current employees have signed, you might want to conduct an internal audit to see if the agreements are still in compliance with the law.

Policies and handbooks

Include clauses relating to confidential information in written policies and handbooks.

Each employee should get a written policy, an employee handbook, or both outlining how confidential information will be handled during and after employment with the organization, in addition to an employment agreement. One policy should clearly state that an employee may have access to confidential information while on the job and must not use or disclose that information unless specifically authorized.

It should be made explicit in another written policy that an employee’s obligation to maintain confidentiality endures even after they leave the organization. 

These kinds of policies are meant to be used in addition to employment contracts, not as a substitute. The types of information that the company considers secret and who should have access to that information should be described in the policies as specifically as possible.

Actively protect trade secrets

Courts frequently consider the precautions a business takes to protect its trade secrets when deciding whether or not material is considered a trade secret. To protect vital information, take the necessary steps. If your business gathers client or customer data in a centralized location (binders, for instance), keep it secure and only give it to key personnel. 

Put passwords in place to restrict access to any trade secrets that your organization keeps electronically.

Safeguarding clients and customers

Make sure that client and customer information is secure. Recognize that, despite the fact that state laws differ, many courts are hesitant to grant trade secret protection to a company’s client list and customer contact information. It is unlikely that information that can be accessed in the phone book or on the Internet would qualify as a trade secret.

varsha sarkar

August 29, 2023

8:40 am

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