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should do: (1) Allow access to trade secrets only on a “need to know” basis; (2)
Prohibit those in the “need to know” category from disclosing the trade secrets to
others; (3) Discipline employees for violating the rules about trade secrets; and
(4) Require all employees to sign a trade secret agreement implementing those
policies and any others you have place. And don’t forget about contract people who
might have access to trade secrets. (Computer programmers come to mind.)
Also, you need to enforce violations in court. Once the “cat is out of the bag,”
you will have lost your trade secret.
You also need to evaluate your company’s portfolio of trade secrets. Think about
your business activities, and ask yourself what information you would withhold
from competitors. It isn’t confined to customer lists. What about vendors, pricing
and business procedures? You need to catalogue everything your company does.
What Can You Do to Trade-Secret Thieves?
devoted to blurring state lines by drafting uniform laws—drafted the Uniform
Trade Secrets Act in the late 1970s. By now, it has been adopted in 47 states
and the District of Columbia. It outlines remedies for misappropriation and
unpermitted use of trade secrets. The remedies are pretty drastic: damages,
injunctions and, for all but innocent violations, attorneys’ fees. It is a pretty
powerful weapon.
In the customer list example, the victim could garner an injunction, damages
and an attorneys’ fees award against both the misbehaving employee and the
competitor.
However, hacking and international theft of trade secrets has impelled Congress
to do more, enacting the DTSA, an amendment to the Economic Espionage
Act. Up until now, federal courts had jurisdiction over claims for trade secret
misappropriation only if diversity of citizenship existed between the victim and
everyone the victim wanted to sue. The DTSA gives jurisdiction over trade secret
Let’s take an example of the paradigm of the trade secret: your customer list.
Suppose you have an interactive website. You have spent seemingly endless time
and treasure generating signups. You have a database full of customers and their
email addresses.
So, you have a disgruntled employee who knows how to access your customer
database—which isn’t difficult to copy. The employee applies for a job with
your most fierce competitor, saying, “By the way, I have their customer list.”
The competitor hires your disgruntled employee; and the competitor raids your
customers. What can you do?
How about having a non-compete agreement to prevent this job shift? Well,
first, non-compete agreements are illegal in California and some other states;
where they are enforceable, they are severely restricted. And whether a non-
compete would stop the disgruntled employee from selling the list is doubtful.
For that reason, the common law has recognized misappropriation of trade
secrets as a tort. As commerce grew, the Uniform Law Commission—a group
misappropriation involving interstate and international commerce to federal
courts, which generally are regarded as having a much easier time nailing foreign
bad buys. (By the way, almost all commerce is interstate; certainly all internet
commerce.)
Without getting into the mechanics of the DTSA, suffice it to say that it has
drastic remedies. It is a supplement to state laws, not a replacement. But it extends
the Uniform act, allowing seizures without notice and other drastic remedies,
along with the remedies already in place in the 48 jurisdictions that have adopted
the Uniform Trade Secrets Act.
If your company policies do not already include policies for protection of your
trade secrets, shame on you. (It should be in your employee manual; more shame
if you don’t have one of those!) If you have such policies, the enactment of the
DTSA should trigger you to be sure that your manuals are up to date and, while
you are at it, also to be sure that all of the trade secrets identified and adequately
protected.
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