Developing a Trade Secret Protection Program to Reduce Risk and Increase Court Enforcement

Los Angeles partner Mark Terman recently authored an article for the Daily Journal titled, “Developing a Trade Secret Protection Program to Reduce Risk and Increase Court Enforcement.”

In the article, Mark highlights why companies should work proactively toward limiting trade secret misappropriation, outlining the necessary steps for developing a trade secret protection program. He says, “Protection programs can deter and limit trade secrete misappropriation. If needed, the program also can put the company in a better position to seek an injunction to stop a competitor’s use of company trade secrets, require their return and seek damages.”

When developing a trade secret protection program, companies should first identify their trade secrets, establish processes to maintain secrecy and outline exit procedures. Mark states that “California’s enactment of the Uniform Trade Secrets Act, Cal. Civ. Code sections 3426 to 3426.11, and the federal Defend Trade Secrets Act, 18 U.S.C. section 1836, et seq., share common essential elements to define ‘trade secret’ as information that (a) derives economic value from not being known outside the company and (b) is the subject of reasonable efforts to maintain its secrecy.”

To identify trade secrets, the company should determine what information could seriously damage the business or give the competitor an unfair advantage by not needing to invest in developing the information on its own. The company also should determine if the information is, outdated or common industry practice. If so, it is not a trade secret. If the information is a trade secret, the company should determine how much time and money the company has spent to develop the information.

Companies can maintain secrecy by using confidentiality agreements that prohibit unauthorized use or disclosure, updating employee handbooks to include confidentiality and social media policies, and identifying and limiting electronic and physical trade secret access on a “need to know” basis. Companies also can lawfully monitor networks, workstations and laptops and consider issuing company-owned devices. Mark adds, “The prevalence of companies that permit use of employee-owned devices for business purposes raises employee privacy and other legal issues that can be anticipated with policies and agreements.” He writes that non-employees should be included in such programs as well.

Companies also should outline exit procedures, including reminding the employee of their ongoing confidentiality obligations, obtaining return of all company property, and obtaining a signed certificate that all company property, including trade secrets, has been returned and any backups purged.

If a theft is suspected, involve counsel and investigate immediately.

Read the article here.

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