Businesses routinely spend an abundance of their resources on acquiring information that will make their operations profitable. Relevant and worthwhile information can take many forms. These include pricing formulas, customer lists, business plans, and product specifications. A ubiquitous issue then, that must be addressed by any mindful employer, is how to safeguard your trade secrets and keep them from being used, sold, or otherwise misappropriated by your former employees.
Uniform Trade Secrets Act
Not dissimilar from the rest of the country, California has ratified the Uniform Trade Secrets Act, located at Civil Code sections 3426.1-3426.11. Under the UTSA, should a business take prudent and sensible actions in an effort to guard its information, and if reasonable actions are taken to preserve the privacy of this information, then California Courts will consider this information as a trade secret and afford it the legal protections of such.
The protection that is given to a company’s trade secrets under the UTSA is not restricted to recorded accounts of information, like electronic data or paper documents. In the state of California, there is no required provision that states that the employer has to prove that the former employee physically and unlawfully lifted information pertaining to a trade secret. Instead, the UTSA also extends its protections to the contents of any former employee’s memory. Consequently, the unauthorized use of a trade secret is able to be proven simply by demonstrating that the former employee disclosed or utilized the content of their own memory concerning a trade secret.
Actionable Means of Protecting Your Trade Secrets
The most practical plan for an employer is to reduce the odds of trade secret theft by exercising all possible logical measures in an effort to protect a trade secret. The actions taken by the employer need to include:
- The use of a confidentiality agreement to be signed upon the hiring of a new employee. The confidentiality agreement must explicitly state that the employee will be trusted with the knowledge of the company’s trade secrets and that those trade secrets are, under no circumstances, to be divulged either while working for the employer or after their employment has come to an end. If you can, list exact items that are considered trade secrets, like pricing information, business strategies, and customer lists.
- Regularly update the confidentiality agreements to incorporate any new and relevant information. Make certain that your employees sign this updated confidentiality agreement as often as needed.
- Have comprehensive internal protocols pertaining to the use of the internet, electronic storage devices, and use of your business’ email.
- Make sure that all of your networks are secured and have restricted employee access that includes the use of multi-character passwords, firewalls, and any other ways you can think of that will restrict access to or monitor network activity.
- Administer exit interviews to each employee that ends employment with your company for any reason. Remind them of the confidentiality agreement that they signed. If possible, try to get a signed confirmation from the employee confirming that they have read, signed, and agreed to all previous confidentiality agreements.
The best way to circumvent a costly lawsuit against a previous employee, for the unauthorized use of trade secrets, is to protect the information from the beginning.
If you have additional questions regarding how to prevent the misappropriation of trade secrets, please get in touch with the Leiva Law Firm by calling (818) 703-1777. We have an extensive background in helping businesses avoid trade secret disputes by preparing precise and enforceable business agreements and contracts. We can help you examine your legal rights in either Spanish or in English, as needed.