A trade secret is proprietary knowledge possessed by a business that is commercially valuable – the formula for Coca-Cola is a classic example. The term “trade secret” is typically applied to proprietary knowledge that is not protected by conventional devices such as patents or copyrights. Although trade secret law, as enshrined in the California version of the Uniform Trade Secrets Act, is designed to protect vulnerable businesses, a rogue employee could inflict tremendous damage if you ignore the inherent risks of maintaining trade secrets.
Confidentiality Measures
Some practical steps to provide your company with maximum legal and practical protection of its trade secrets include:
Formulating a coherent confidentiality policy, firmly grounded in California trade secret law, and include it in your company’s employee handbook. This will ensure that no employee can claim that he didn’t know the rules.
Mark as “Confidential” all documents that you wish to protect. This will prevent an employee from claiming that he didn’t realize that a particular document was confidential.
Distribute confidential information only on a strict “need to know” basis.
Revoke an employee’s access to confidential information at the termination of the employment relationship, and collect or delete all copies of confidential information in the employee’s possession.
Non-Compete Agreements
A non-compete agreement is an agreement that restricts an employee’s right to work for the employer’s competitors for a time after termination of the employment relationship. California courts are very unfriendly to non-compete agreements and usually hold them invalid as a matter of public policy. Only under rare circumstances will it enforce such an agreement.
Non-Disclosure Agreements
In contrast with non-compete agreements, California courts will generally enforce nondisclosure agreements (NDAs). A well-drafted non-disclosure agreement should clearly define the scope of protected trade secrets. Keep in mind that an NDA can obligate the employee to keep confidential certain proprietary information that is not protected even under trade secret law.
Enforcement
If you discover that your company’s trade secrets have already been disclosed, it is time to take action. Retain a lawyer if you have not already done. There is a path of escalation in a trade secret legal conflict – the first step of which can and should be skipped under certain circumstances. The three main steps in escalation are:
Sending a “cease and desist” warning letter;
Filing for an injunction preventing your trade secrets from being used in the future; and
Filing a lawsuit for damages already incurred.
The “Inevitable Disclosure” Doctrine
The “inevitable disclosure” doctrine, adopted by California in 1999, represents a loophole in California’s ban on non-compete agreements. If a former employee is working for a competitor under circumstances where the employee cannot perform his duties without using the former employer’s trade secrets, the former employer can be granted an injunction against the employee and the new employer without showing actual or threatened misappropriation of its trade secrets.
We Can Help You Minimize Your Legal RIsk
If you are concerned about the loss of your company’s trade secrets at the hands of a rogue employee, or if you are worried about becoming embroiled in a trade secret injunction dispute filed by the former employer of your current employee, call CKB Vienna today or contact us online to schedule a consultation. We serve clients in Rancho Cucamonga, San Bernardino County, Los Angeles County, Orange County, and Riverside County.