Have a general question about employment law? Want to share a story? I welcome all comments and questions. I can't give legal advice here about specific situations but will be glad to discuss general issues and try to point you in the right direction. If you need legal advice, contact an employment lawyer in your state. Remember, anything you post here will be seen publicly, and I will comment publicly on it. It will not be confidential. Govern yourself accordingly. If you want to communicate with me confidentially as Donna Ballman, Florida lawyer rather than as Donna Ballman, blogger, my firm's website is here.

Tuesday, June 14, 2011

8 Things Every Employee Should Know About Trade Secrets

You might have read about the suit PayPal filed against Google and two of its former executives, accusing them of stealing trade secrets. But you don't need to be a high-ranking executive to get caught up in a trade secret suit these days. It's common for companies to have employees sign an agreement saying they won’t take trade secrets or confidential information when they leave. Many employees wrongly assume that, just because they never signed an agreement, they can take their employer’s customer list or other confidential information and use it to form their own business or give it to their new employer.
On the other hand, most company information is not a trade secret. Even if you did sign a confidentiality agreement, some information isn’t protected. Whether or not you signed an agreement regarding your company’s trade secrets, every employee is affected by trade secret law. Here are some things you need to know about trade secrets and your employment:
  • Independent value. It’s only a trade secret if the very fact of it being unknown to competitors makes it have independent value. In other words, if it would be something a competitor would value, then it might be a trade secret. If you are the safekeeper of the KFC secret recipe or know the formula for Coca Cola, it’s a no-brainer that you have a trade secret. But competitors might find other, less obvious information valuable, such as client lists, manuals, or pricing.
  • Kept confidential. Your company will almost always claim that their customer list is a trade secret. Yet many companies brag about customers on their websites. Some even put their whole customer list, pricing, brochures and manuals out there on the web. If the company put it on the web, it can’t be a trade secret. Same with anything they put out in the public. If they put their “secret recipe” into a charity cookbook, goodbye trade secret. If they apply for a patent for the information, the information becomes a public record and is no longer a trade secret.
  • Not available through public sources. If the way your company gets its business is through cold-calling the yellow pages, business directories, Chamber of Commerce listings, or Google, then they probably can’t protect their customer list. If, for instance, you sell widgets to airplane manufacturers, your potential client list is a finite one. If you search for “airplane manufacturer” on the web and can generate a potential client list, the courts will probably say you’re allowed to do so when you work for a competitor.
  • Not available for purchase. If your company gets leads from a purchased source, the leads are not a trade secret. Let’s say everyone in your industry gets leads by an email alert that they pay to subscribe to, so that when an event occurs that causes your customers to need you, everyone who pays gets an email and the first to contact the customer or the one with the best price wins. That’s treated the same as a publicly available source. It isn’t a trade secret.
  • Not ascertainable. Just because the company keeps it under lock and key and thought of it first still doesn’t necessarily make it a trade secret. For instance, if the company compiles a “secret database” of leads, but their compilation consists of buying up yellow pages, Dun and Bradstreet listings, and a chamber of commerce directory and merging them into one list, it’s not hard for a competitor to come up with the same list. The information has to be something they used considerable time and expense to put together, and that a competitor wouldn’t be able to figure out on their own.
  • Noncompetes and trade secrets. Noncompete agreements can only be used to protect a legitimate interest of the employer, such as trade secrets. The one thing a noncompete agreement can never be used for is to prevent competition – that’s antitrust and a violation of federal and most state law. If your noncompete agreement says its purpose is to protect the company’s trade secrets, then the company can only enforce it if you had access to actual trade secrets.
  • Don’t do it. If you had access to a trade secret, you can’t blog or tweet about it. You can’t email it to yourself and use it. You can’t give it to your new employer. You can’t give or sell it to a friend.
  • Bully tactics. Some companies will use an employee’s access to trade secrets to bully them into not working for a competitor or going out on their own. When the employee announces they’re leaving, the company lawyer sends a letter threatening the employee with a trade secret suit. Many employees get scared and stay or get jobs outside their industry because they can’t afford to fight or lose their jobs. Just because you had access to a trade secret doesn’t automatically mean you can’t work in a competing business. Most company information isn’t a trade secret.
If you signed a confidentiality agreement or had access to something you think might be a trade secret, get advice from an employment lawyer in your state about your rights and responsibilities before you accept a job from a competitor or copy the information to use after you leave.

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I appreciate your comments and general questions but this isn't the place to ask confidential legal questions. If you need an employee-side employment lawyer, try http://exchange.nela.org/findalawyer to locate one in your state.