Best Practices for Protecting Confidential Information and Trade Secrets

Trade-Secrets-300x169The federal Defend Trade Secrets Act (“DTSA”), which is mirrored by the Uniform Trade Secrets Act (“UTSA”) adopted by most states, provides employers with legal recourse after the misappropriation of their trade secrets. Whether employer trade secrets, defined as information that derives economic value by not being generally known, are illegally accessed by hackers or stolen by employees, there is no legal recourse for the theft under the DTSA if the trade secrets weren’t adequately protected. It is a necessary element of a claim for damages under the DTSA and related state legislation that an employer took reasonable precautions to protect its trade secrets. What constitutes “reasonable precautions,” however, is dependent on the facts and circumstances of each case.

Protecting Confidential Information & Trade Secrets from Employees

Not all confidential information qualifies as a trade secret. Accordingly, business practitioners recommend protecting confidential employer information from employee misuse through stringent employment contracts and confidentiality agreements. Its recommended employers insert the following clauses into their employment agreements:

  • A clear definition of the information that qualifies as confidential or a trade secret;
  • A clear delimitation of an employee’s right, or lack thereof, to access that information;
  • Detailed requirements of actions that employees must take to protect confidential information and trade secrets; and
  • A provision defining the employee’s duty of confidentiality post-employment.

Contracts alone aren’t enough to support a claim under the DTSA, but employers may seek damages from employees and related third parties through breach of contract litigation.

Physical and Electronic Protections

Courts commonly look at the following two factors in determining whether confidential trade secrets are adequately protected under the DTSA:

  • Security Measures: These should be proportional to the nature and location of your trade secrets. For example, a secret recipe, program, or business plan might be safest in a secured vault where it’s not accessible via the internet. Electronic trade secrets, however, should be protected by encryptions, passwords, closed networks, security software, and professional security monitoring. One of the biggest mistakes startup companies make is storing trade secrets on “cloud-based” software easily accessible by the software host or employees.
  • Need-to-Know Disclosure: Limiting access to trade secrets is also essential. Only key employees should have access to corporate documents. It is best practice to have employees’ computer use limited to the information necessary to perform their jobs. Employees should seldom have access to trade secrets via a remote system, and there should always be two-step verification to prevent password sharing and unintentional access.
  • Additional Precautions: Disabling USB ports, disc drives, and the ability to copy and share protected information is often essential.

Hire an Experienced Silicon Valley Trade Secrets Attorney Today

In order to run your business, you are forced to rely on other people, and sometimes that means your trade secrets are vulnerable. Taking the above steps, however, is essential to preserving your rights. Schedule your trade secret protection consultation with one of our Silicon Valley corporate attorneys at Structure Law Group, LLP by calling 408-441-7500 or contacting us online today.