How to protect trade secrets
You arrive at your office Monday morning to find this memo from a key employee on your desk:
TO: John Smith
FROM: Jane Doe
RE: New job opportunity
I have enjoyed my 10 years at Plastics Inc., particularly in our product development department. I learned much by way of sales and marketing of our product and the research and development involved with Plastics' products. However, I was recently offered a position with Polymers Inc., to perform similar duties and functions, but with better pay and benefits. I am only taking with me my personal files and some training materials. I wish you the best.
Jane Doe was a star in your company. She was involved with the research and development of a new product that is about to be marketed by Plastics. Your competitors are far behind on the learning curve for this revolutionary product. The loss of Jane Doe not only pushes back the introduction of your product, but you fear that her employment by your competitor will permit that company to bypass the trial and error Plastics experienced in researching, developing and defining a market plan.
You suddenly realize that her departure to Polymers poses a substantial threat to your company. You don't have a noncompetition agreement with Jane Doe. But you recall having read at one time something about being able to stop employees from working for a competitor if their new job necessitates the use of your company's trade secrets. So, as you look for the article discussing what a trade secret is, you think to yourself: ``What do I do now?''
What are they?
A range of information can be protected as a trade secret. Simply calling your company's information a trade secret, however, will not make it so. A business must affirmatively and consistently behave in a way that proves its desire to keep the information secret, such as using confidentiality agreements with customers, suppliers and employees, restricting access to the information and marking drawings and other critical information ``confidential.''
The information also must have economic value from not being generally known by the public. That can include ``negative knowledge,'' which is knowing what mistakes to avoid.
Therefore, if an item such as a business plan, customer list, supply source or manufacturing process is protected, valuable and unique, it is a trade secret. And a trade secret is eternal as long as it is not revealed. Thus, careful attention must be paid when revealing information in advertising, requests for quotes, Web pages, product catalogs and a company prospectus.
Having determined that your former employee had access to and is now using trade secrets, you have several options.
You can seek an injunction requiring the employee and her new employer not to use the information. In fact, some courts will prevent a former employee from working for a competitor if that individual cannot help but exploit knowledge from her previous employer and put it to work for a competitor. That is especially so if the former employee takes a position that is similar to her previous job, and the new position pays considerably more, even though the responsibilities are not very different.
You can also seek damages for the actual loss and, in some instances, recover exemplary damages and attorneys' fees. Another option is to persuade the Department of Justice to pursue an action against the individual under the Economic Espionage Act of 1996. The Act makes it a crime for any person to convert a trade secret for his benefit or the benefit of others knowing that the offense will injure the owner of the trade secret.
The act also makes it a federal crime to receive or buy the trade secret knowing it has been stolen or obtained without authorization. Penalties include imprisonment up to 10 years and a fine up to $500,000. A corporation can be fined $5 million.
What to do about it
Proper protection requires action today to be ready for tomorrow. You can stop a key employee from using your trade secrets only if you protect the information properly under trade secret laws. Doing so will prevent that key employee from setting up his or her own business in direct competition with you or becoming an employee of your toughest competitor.
Moreover, while the proprietary information remains unique, valuable and protected, it can remain a trade secret for decades. And there is no geographical limitation. Therefore, if you have not undertaken prior trade secret protection efforts, now is the time to do so. It is too late when a competitor obtains and uses your valuable trade secrets against you, thereby stealing your customers, technology base and business information.
As to Ms. Doe, you draft an e-mail to your boss, suggesting an urgent meeting to discuss the situation, and how to better protect your trade secrets in the future.
Alan Rothenbuecher is a lawyer at Brouse McDowell in Akron, Ohio.