Trade Secret / Noncompete Blog

As we wind down the holiday season and prepare for next year, it’s time to look forward with an eye on the past.  2009 has seen a remarkable number of decisions that chipped away at the enforceability of a company’s noncompete agreements with its employees. Noncompete agreements are no longer reliable or effective measures against the loss of valuable innovations, products and services. In 2010, a company’s need to protect its valuable information (“trade secrets” = formulas, devices, methods, techniques, or processes) requires a different approach. What steps are available to your company to shore up its ability to keep valuable secrets from your competitors?

An essential New Year’s resolution is development and implementation of a Trade Secret Protection Program, tailored to your company’s products and services. This year start a company-wide initiative that focuses on identification and protection of valuable and secret information and keep the basics in place. 

1. Review standard form agreements and policies.  Employee policy manuals regarding noncompete, non-disclosure, confidentiality, invention assignment and ownership, nonsolicitation, antiraiding, privacy, computer use provisions, and, most importantly, departing employee procedures and policies will require updates.  Are these provisions consistent?  Are they easy to understand by the employee?  Are the provisions reasonable in scope?

2. Review existing agreements with current employees.  Do you have signatures of your key inventors, innovators and technical employees on the agreements?  Signed acknowledgments of the policy statements?  Again, updates are most likely needed, especially for long-term employees.

3. Identify each Trade Secret and its value. Make a list if you don’t already have one. What are the inventions and innovations that create value for your company? What innovations are in the pipeline on the way to commercial use? Why do these innovations have value? What is the cost of development? What revenues, present or future, are derived from the innovation? What is the value to the marketplace? What about value to your competitors?

4. Confidentiality. Is each invention or innovation a secret from the marketplace? Who has access to information about the development? Is the company taking ‘reasonable’ steps to keep information secret? Are there multiple levels of security to limit access on a need to know basis? Are you able to document the security measures taken to protect information?

5. Record Keeping.  Where is the “vault” that tracks the trade secrets?  What information is kept in the “vault” and who has access?  How is the information identified, tracked, and updated?  How often?

Development and implementation of a Trade Secret Protection Program is a cross-disciplinary activity that involves legal, IT, HR, finance, and key technical personnel. There are good resources available to develop a trade secret protection program for your company. One such resource is the ISO/IEC 27001, an Information Security Management System with standardized protocols for information security management.

Trade secrets are often the life blood of a company and protectable with reasonable protocols and resolve.