Use Employment Agreements to Protect Trade Secrets

Author:Mr Thomas W Brooke
Profession:Holland & Knight LLP

Employee brain power is often the most important asset a company can draw upon. This includes everything from the accumulated knowledge of company procedures, policies and basic operations to very specific and valuable facts about proprietary products and services and important customer information. In today's digital marketplace, the loss of one or more key employees who have been exposed to confidential company information can be devastating. It is also a fact that employees switch jobs on a regular basis, especially in the software and e-commerce fields. New opportunities and information about new opportunities abound. Many employers, knowing this fact, attempt to restrict employee mobility through non-competition and confidentiality provisions in employment agreements. Various, states, however, treat these types of agreements differently. California employees cannot be required to agree not to compete upon termination of employment, for instance. Recent court rulings in California indicate that this rule covers “virtual employees” who work for a California company in a different state. Other states enforce agreements in varying manners and most states will not enforce agreements that are overly broad and too restrictive. Ask new employees to sign a written confidentiality agreement upon hiring. Explain his or her rights under the agreement carefully. Determine what covenants are appropriate and what exactly is to be protected. Some examples include: Nondisclosure of trade secrets and confidential information? Noncompensation? Nonsolicitation of customers? Nonsolicitation of employees? A combination of all or some of the above? Once an employee is on board, continue to take steps to define sensitive areas and to plan for inevitable employee departures Alert employees and third parties to the existence of trade secrets and their proprietary and confidential nature. This especially includes items like...

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