Protecting Your Trade Secrets in the Digital Age

In recent years, as the competition for talented employees has increased, the variety of means by which a company’s trade secrets can be stolen by departing employees means that businesses are at greater risk than ever from determined competitors. Keeping control over confidential information in the era of PC’s, LANS, WANS, e-mail, Intranets, laptops and personal organizers is a challenge for even the most vigilant employers. However, there are certain things you can do to improve your odds of protecting your secrets, including the implementation of additional measures to address the special concerns posed by new technology.

The Uniform Trade Secrets Act, which was adopted in Michigan (making it the 43rd state to do so), was designed to codify existing trade secret law. The UTSA defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process that (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Practical considerations suggest that you should implement policies that not only let you sue the departing employee who takes your trade secrets and the competitor who uses them, but also make the taking of the trade secrets difficult in the first place. Prudent steps to protect your secrets typically include:

  • Confidentiality agreements with employees.
  • Marking confidential information CONFIDENTIAL.
  • Adoption of a company policy memorandum concerning proprietary information.
  • Limiting access to confidential information.
  • Maintaining policies and procedures requiring that confidential information be secured in a safe location following use.

The practice of keeping more and more business information on computers means that, in addition to the customary steps mentioned above, you should also:

  • Utilize the directory and file permissions features of your network software to limit access to certain directories and/or files on your network to authorized persons or groups. Varying levels of access can be given to different users or groups of users.
  • Use file encryption software to encrypt sensitive files so that only persons who know the correct password can read the file.
  • Prohibit the copying of confidential information onto floppy disks or the hard drives of notebook PC’s or other devices that can be removed from the work environment without simultaneously providing notification to the person charged with preventing electronic piracy.
  • Send a letter to a departing employee’s new employer that explains the company’s trade secrets policies.
  • Require any departing employees to surrender for inspection any laptops or hand held devices that are not company property but that the employee uses in the performance of his job.

Today information can be stored, accessed and communicated easier than ever. Adopting and enforcing effective policies to prevent the loss of trade secrets under such circumstances without creating a Big Brother atmosphere requires diligence combined with an appreciation for the privacy concerns of employees. An emphasis on one at the expense of the other could undermine the company’s overall goals. However, the failure to recognize the existence of the dangers that technology presents for confidential information could spell defeat in the battle for the marketplace.