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Protecting Your Business's Trade Secrets

trade secret.jpgIn the age of technology and the Internet, many businesses are more concerned than ever about protecting trade secrets. Data shows that trade secret litigation in federal courts has more than doubled between 1995 and 2004 and it is projected to double again by 2017. In over 85 percent of these cases, the person alleged to have misappropriated trade secrets was either an employee or business partner. It is estimated that businesses lose hundreds of millions of dollars every year due to the misappropriation of trade secrets.

The reality of today's job market is that very few employees will remain with one company for their entire career. As a result, one of the biggest threats to businesses when it comes to trade secrets is current and departing employees. It is essential that businesses be proactive in safeguarding trade secrets, not only as a means of avoiding costly litigation, but to protect the bottom line.

What Is a Trade Secret?

In California, trade secrets are governed by the Uniform Trade Secrets Act, which can be found in Civil Code § 3426. Under Civil Code Sec. 3426.1(d) a trade secret is defined as:

  • Information, including a formula, pattern, compilation, program, device, method, technique, or process that:
    • Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
    • Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The law makes clear that in order for trade secrets to be legally protected, a business must take reasonable steps to safeguard and maintain the secrecy of that information.

What Can You Do to Protect Your Business's Trade Secrets?

Non-compete clauses in employment contracts are largely unenforceable in California as a matter of public policy. Though California Business and Professions Code §16600 does provide some limited exceptions, employers should assume that employees are free to work for competitors when they leave and plan accordingly.

The following includes just some of the steps that can be taken to help prevent misappropriation of trade secrets:

  • Require employees who will or currently have access to trade secrets to sign proprietary information or confidentiality agreements;
  • Adopt and enforce personnel policies that prohibit employees from emailing information that contains trade secrets to personal email addresses;
  • In order to assist employees in understanding what they are required to protect, clearly mark documents that contain trade secrets or sensitive information as "confidential"; and
  • Limit access to confidential information or trade secrets to employees who are required to use this information as part of their job.

Protect Your Business

Well-drafted employment contracts and sound employment practices can prevent many problems well in advance. An experienced counsel who is business savvy can devise the best legal strategies and business solutions to ensure your business is protected. Contact the skilled San Jose business attorneys at Diemer, Whitman & Cardosi, LLP to discuss your options. We are based in San Jose and serve businesses throughout Silicon Valley and the Bay Area.




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