The theft of trade secrets and intellectual property can be devastating to a company. Sales and profits could decrease due to losing your competitive advantage and market share. Expenses would be realized in increased legal fees, business insurance and research and development costs.
To protect your trade secrets, be sure that new hires sign a nondisclosure agreement prior to their employment start dates. A trade secret is defined as information that, by virtue of its secrecy, gives an owner a commercial or competitive advantage. Examples include pricing, customer lists, marketing studies, strategic growth plans and unique services provided or products created by the company.
One issue in determining if the information is a trade secret will be the extent to which the information may be developed independently.
Be ready to explain why the information gives you a commercial or competitive advantage. Do not leave business plans lying around. Do not publicize the names of customers and do not post pricing structures.
Another matter is whether the owner of the information has taken reasonable steps to protect its confidentiality. Write “confidential trade secrets” on documents. Create a list of the names of employees with access to the confidential information and record why each has access. Maintain a strong disciplinary policy if an associate shares or releases the information. Use the password protection feature in your software. Keep documents in a secure, locked area. Utilize a check-in and check-out system if the information will be allowed to leave your care.
A copyright protects specific expressions of an idea. However, if the expressions are produced by an independent contractor, they are owned by the independent contractor, unless a written agreement to the contrary is signed. An employee also will own an expression unless it is a work made for hire.
A work made for hire must meet four criteria: First, it must be prepared by a team member in the scope of his employment. Second, the work must occur substantially within authorized work hours, space and equipment. Third, the associate must perform the work to serve the corporation. Fourth, the work must be specifically ordered under certain stipulated circumstances.
Ensure that your intellectual property is securely held in the name of the business. Use written agreements to obtain appropriate assignments regarding rights and ownership. Utilize work-for-hire agreements and be sure all criteria are met. In addition, hire legal help and file the required patent or trademark paperwork when appropriate.
Requiring a new hire to sign a noncompete agreement will ensure that the staff member does not work for a direct competitor within a certain geographic area for a specified period of time. The state of Missouri recognizes that organizations need to protect confidential and trade secret information, so reasonable agreements are enforced. Three questions must be answered to ensure that a noncompete is reasonable.
• Is the restraint on trade greater than necessary to adequately protect the interest of the employer?
• Will undue hardship be placed on the employee that will prevent him from earning a living? Time and geographic limitations will be reviewed.
• Third, does the restraint unduly injure public interest in free competition?
Nondisclosure agreements, copyrights, patents, trademarks and noncompete agreements are all sound theft prevention tools. Contact an attorney to begin protecting what is rightfully yours.
Lynne Haggerman is president/owner of Haggerman & Associates, a firm specializing in management training, retained search, outplacement and human resource training.
