United States: Protecting Your Companies Competitive Edge'

Last Updated: July 2 2018
Article by Benjamin I. Fink and Neal F. Weinrich

You might not think about non-competes, employee and customer non-solicits or trade secrets and confidential information very often. But we do. They are core to your business and help maintain your competitive edge. And we're proud to play a key role in shaping this area of the law through our practice and thought leadership.

All companies, regardless of size, have sensitive information and valuable customer and employee relationships. There are simple measures that every business owner and manager can take to protect these assets. For that reason, we've compiled this update to share with you practical steps you can take to prevent departing employees from competing unfairly or using confidential information or trade secrets.

We encourage you to take a few minutes to review this update. We're proud of this content and believe you will find it to be helpful. In fact, many days a year, you can find us on the road, leading and participating in industry and professional conferences addressing these important topics. This is what we do.

Protect Your Business: Trade Secrets & Confidential Information

In the trade secret world, the American Intellectual Property Law Association's Trade Secret Summit is a premier conference that Benjamin Fink and Neal Weinrich are fortunate to attend and help organize every year. The information shared and thought-provoking conversations with industry peers make this conference an annual highlight for Ben and Neal. A few conference insights and take-aways on this subject include:

  1. Implement appropriate measures to protect company trade secrets. There are lots of steps companies can take to protect information that is valuable to their business. The following motto is a simple way to help companies think about how to protect their trade secrets: "State it, Stamp it, Secure it, Shred it, Sign it, Supplement it, and Substantiate it." A knowledgeable legal advisor will counsel his or her clients to take these proactive measures.
  2. Create a formal trade secret protection plan. This can be more complicated than it seems. For that reason, you should involve in-house counsel, business decision-makers and outside counsel in the process.
  3. Lastly, carefully consider where you store your company's confidential information and trade secrets. A recent BFV blog post, " Be Wary of Storing your Trade Secrets in the Cloud," highlights an important consideration relating to where you store proprietary information.

READ MORE
WATCH OUR VIDEO, "What is a Trade Secret?"

Yes, Even Your Business has Confidential Information

Nearly all businesses have valuable information that can be considered confidential. Think about your ordinary course of business. A typical day likely involves sharing and receiving confidential information with employees, customers and suppliers and during other commercial engagements where confidential information is exchanged.

As a business owner or manager, steps should be taken to protect confidential information within your organization. It should be a business priority. Below are some valuable tips, as excerpted from a series of articles authored by Ben and Neal in "Practical Law Commercial Transactions," Georgia series (Thomson Reuters, 2018):

  • Limit access to confidential information and trade secrets to employees with a need-to-know.
  • Implement computer, e-mail and internet policies that govern employees' access and use of company systems.
  • Train employees to prevent the inadvertent disclosure of sensitive information.
  • Implement robust physical and electronic security measures.
  • Have contingency plans and procedures to address when any leaks are detected.

CLICK HERE for additional tips and sample contract provisions ("Practical Law Commercial Transactions," Georgia series).

Tips when Hiring from a Competitor

Many times, the most qualified and experienced candidates for positions you are seeking to fill in your business are those who are currently working for your competitors. If you are not careful, the hiring of an employee from a competitor can be fraught with peril.

While much of the decision as to whether to hire someone from a competitor may be driven by the types of restrictive covenants the person has signed (non-compete, customer non-solicit, employee non-recruitment and non-disclosure/confidentiality), there are certain steps you can take to minimize the risk of any litigation or liability regardless of whether of any restrictive covenants are involved. Here are a few of those steps:

  1. During the interview process, be sure to advise candidates that you expect them to comply with their legal and contractual obligations before and after the end of their employment with their current employer. This should include ensuring that employees comply with any fiduciary duty or duty of loyalty they may have to their current employer. The parameters and scope of this duty are state specific, so you need to be sure to know the law of the state or states involved.
  2. If the candidate is customer facing in his or her current position, you should be sure that you and the candidate are on the same page as it relates to notifying customers of the transition and/or soliciting clients once the employee has joined your company. How this is handled will be dictated by the nature of the restrictive covenants, if any, the candidate has signed and the applicable state law regarding the employee's fiduciary duty and duty of loyalty.
  3. During the interview process, candidates should be reminded of their obligation not to take any information that constitutes confidential information or trade secrets of their current employer.

READ MORE
READ OUR BLOG, "NON-COMPETES – WHO IS EXCLUDED IN GEORGIA?"

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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