Best practices for commerce secret protection in corporations

Best practices for commerce secret protection in corporations ...

Trade secrets are becoming more important and essential to maintaining a company's success, but companies are often unaware of the legal, administrative, and technical skills they can use to safeguard this information. Although this knowledge gap is common in most industries, an employee's departure can pose the most threat.

Pfizer, a pharmaceutical company, filed a lawsuit in the District Court of California claiming misappropriation of trade secrets, breach of contract, and trespass to chattel (essentially intentional interference with personal property).

Ms. Li, Pfizer's employee, alleges that over 12,000 records included information about vaccine research, operational objectives, development of new drugs, and clinical trial techniques. She allegedly deleted records she previously saved on her Google Drive account in preparation for a job with a competitor.

Pfizer contacted Li before making an attempt to cover her through a shambles or a digital wallet. Pfizer eventually filed a lawsuit against Li and demanded a temporary restraining order to prevent further disclosure. Pfizer agreed to terminate the lawsuit after the parties reached a contract permitting Pfizer's counsel to search Li's personal emails, Google drive accounts, and other personal computing devices or accounts that might contain confidential information or trade secrets.

This complaint highlights the need for businesses to adopt effective legal, administrative, and technological measures to protect confidential information and trade secrets.

Li was required to not disclose or use any confidential information other than in her employment without Pfizer's written permission, and return all Pfizer's property and material in her possession within 48 hours of her termination.

Employers should have a practice of protecting their trade secrets under the supervision of adherence to strict confidentiality agreements, according to state laws and the federal Protect Trade Secrets Act, 18 U.C.A. 1836. First, they may establish confidentiality obligations as a result of a single arrangement or as a part of an employment agreement.

In these agreements, a company may define what it considers confidential and trade secret information, detail the employee's use and disclosure restrictions, and outline the remaining obligations after the employment relationship is over. Similarly, non-competition and non-solicitation agreements can work to prohibit employees from interfering with co-workers, clients, or vendors who may possess or represent trade secrets.

Obwohl the Pfizer complaint ne resemblanced, administrative procedures are ideally in place to educate employees, not only to emphasize the legal obligations that they have, but also to clarify, in advance, the scope of such obligations.

Employees who are attempting to download a spreadsheet or report while on the job may not want the employer's confidential data to appear in the document, rather than the format of the document, believing it to be generic knowledge. We have seen employees claim ignorance as to the distinction between an employer's trade secrets and general knowledge gained on the job.

Training as to employer confidentiality and trade secrets may help avoid bad faith misunderstandings and, in any event, increase an employer's claim as to having adequately protected its trade secrets a legal obligation.

Companies should maintain comprehensive trade secret and confidentiality procedures as may be seen in employee handbooks. These processes and policies can provide valuable training, identify categories of relevant, protected information, define employees' obligations, establish appropriate levels of access across certain employee groups, and generally establish company protocols for keeping confidentiality.

When it comes to trade secrets, businesses should disclose to employees at all levels their duties. However, some existing employees may not be educated on the company's current confidentiality and trade secret guidelines and may need to be trained. This should be done when it is appropriate, physically and technologically.

Employers should consider routine and documented leave interviews during which the surrender of all documents and files is requested one exception often found in employee agreements as well as providing the employee with a copy of her employment agreement or other confidential obligations.

The Pfizer complaint provides some insight into some technological precautions employers should contemplate implementing. Prior to this incident, the company discovered Li's file transfer after developing a system to monitor employee uploads from Pfizer devices and directories to cloud-based platforms.

There are a variety of other technological features and safeguards that employers should consider. Some include: limitation of off-site access, use of sufficient encryption, employee computer activity monitoring software, and automatic shutdown of employee access upon departure.

Pfizer's case had several technological tools in place, without which it may not have discovered Li's misappropriation until it was too late. Its existing USB access restrictions made misappropriation trade secrets more difficult, while its upload surveillance allowed it to monitor suspicious transfers, such as Li's. A company without such foresight might lose its competitive advantage.

Companies should have a detailed strategy for dealing with potential employee misappropriation, including for making a decision when an investigation is justified. Having the necessary controls to quickly obtain evidence of misappropriation is also beneficial in obtaining a tailored remedy.

The plan should include steps to enact the spread of confidential information and to contact individuals and entities to whom disclosure was made. Although less commonly thought of, businesses are also having the option of reaching out to the competitor once they've acquired the knowledge they need from their internal controls. They should always be prudent, however.

If the trade secret program is already underway, legal agencies should strongly consider putting in place a comprehensive trade secret program or strengthening existing policies. A comprehensive, complimentary set of legal obligations (agreements, processes, policies, and technical tools) is vital to companies' protection of trade secrets and their competitive advantage.

Moreover, the concern for trade secrets should result in an inadvertent receipt of a competitor's trade secrets. Companies should consider similar legal, administrative, and technological measures as applied to new hires and consultants, particularly those who have worked for them.

Ian DiBernardo, a New York-based partner at Brown Rudnick LLP, has served as the head of the firm's intellectual property litigation practice group. He is also the practice group's CEO, focusing on intellectual property and technology transactions and litigation. He has handled transactions involving functional ingredients, nutraceuticals, protein bars, and supplements. He can be reached at IDiBernardo@brownrudnick.com.

Jason Sobel, a New York partner in Brown Rudnick's intellectual property and technology practice practice group, provides consulting to clients in a wide range of industries, including extensively in the food science and ingredients industry, developing IP portfolios, managing business transactions, and shepherding clients through complex multiparty, bet-the-company litigation.

Marcus Strong is a New York-based associate at Brown Rudnick LLP, which is focused on litigation. He can be reached at MStrong@brownrudnick.com.

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