Protecting Trade Secrets by Creating a Culture of Confidentiality

The estimated value of trade secret information in the U.S. is a staggering $5 trillion. Billions of dollars are lost each year as a result of trade secret theft. It’s not surprising, then, that corporations spend billions of dollars to protect their trade secrets. Yet many ignore a low cost way to avoid misappropriation: creating a culture of confidentiality.

How do you create this culture? By incorporating discussion of — and a mindfulness about — confidentiality, beginning with hiring interviews, ending with exit interviews, and in interactions with employees between the two.

Here are some tips for getting started:

1.Begin discussions about confidentiality even before employment.

2.Condition employment upon the employee’s agreement to maintain the confidentiality of key information and sign a confidentiality or nondisclosure agreement.

3.Adopt a confidentiality policy that specifically states that trade secrets are to be kept confidential and that they cannot be used after leaving the company.

4.Adopt policies to safeguard information on any kind of device that can be used to store electronic data, including laptops, personal computers, personal digital assistants, cell phones, land line phones, facsimiles, and any that use the Internet or wireless Internet connections. These safeguards may include restrictions as to where and how these devices may be used.

5.Adopt policies regarding the use of any kind of device or communication method that can transmit electronic data, including phones, facsimiles, cameras and camera phones, e-mail, instant messaging, the Internet and wireless Internet connections. Again, the substance of the policy is dependent upon the nature of the business and its confidential information. Such policies generally include restrictions on use of these devices or methods of transmissions.

6.Reinforce policies by reference in an employee handbook, employee orientation, training sessions, meetings, notices, and in exit interviews.

7.Reward and acknowledge employees who strictly follow policies aimed at protecting trade secrets.

8.Offer special rewards to employees who identify gaps in policy or leaks of information. Employees often better understand the actual confidentiality practice than managers and the reward system should encourage them to share their knowledge.

9.Admonish and retrain employees who fail to follow protection-related policies. Sanctions should be commensurate with the violation.

10.Document the disclosure of particularly sensitive or key information to a specific employee through the use of a written memorandum signed by the employee. The memorandum should identify the information to be disclosed and acknowledge the employee’s understanding that the information is to be kept confidential, internally and externally. Be sure to document the confidential information as well as the description as they may be necessary to prove that the document was unique and/or misappropriated. Provide the employee a copy of the memorandum and keep a copy for your file.

11.Begin meetings in which confidential information will be disclosed with an announcement that the information to be discussed is confidential and a reminder of each employee’s duty to keep the information secret. Invite questions or comments about how best to protect the confidentiality of the information.

12.Be consistent when enforcing your policies. If the policies provide that certain information will be protected in a specific way, failure to employ this protection could be viewed as a failure to employ reasonable measures.

13.An important component in creating a culture of confidentiality is honoring the confidential information of others. Using a competitor’s trade secret information creates a risk of liability and sends a mixed message to employees. In some cases, a trade secret owner’s activity can be an affirmative defense to liability in the event of misappropriation. This situation arises most often in the context of corporate raiding. A court may refuse to enforce a non-compete agreement against a former employee if the employer has ignored or violated similar agreements when hiring employees away from a competitor.

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