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?


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 financial information and drawings....

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