Employees and Trade Secrets

Employees and Trade Secrets

Welcome to Plaskacz and Associates’ ‘LEGAL SOLUTIONS TO SOFTWARE ISSUES’ newsletter. This is a free information service provided by the law firm of Plaskacz and Associates. IT IS DESIGNED TO PROVIDE INFORMATION OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO REPLACE SPECIFIC LEGAL ADVICE. Q2 2002

Employees leaving information technology firms often take with them vital trade secrets of the their former employer. The results of such action may be extremely damaging to the former employer, irrespective of whether or not such damage was intended by the employee. One way to minimize any potential fallout from a former employee exploiting company trade secrets is to conduct an extensive ‘exit interview.’ At this interview the employee is reminded of all the confidentiality obligations owed to the former employer and how such obligations extend beyond the employment contract period as a result of the duty of good faith imposed on all departing employees.

Employees leaving information technology firms often take with them vital trade secrets of the their former employer. The results of such action may be extremely damaging to the former employer, irrespective of whether or not such damage was intended by the employee. One way to minimize any potential fallout from a former employee exploiting company trade secrets is to conduct an extensive ‘exit interview.’ At this interview the employee is reminded of all the confidentiality obligations owed to the former employer and how such obligations extend beyond the employment contract period as a result of the duty of good faith imposed on all departing employees.

In order to conduct an effective exit interview, the company must have throughout the employment term created an atmosphere of respect for its intellectual property. To the extent that an employee already has an awareness of the value that a company places on its intellectual property assets, the reinforcement of the need to protect that value after departure is made that much easier. Of course, a contractual term within the employee’s employment agreement prohibiting post termination disclosure is the most effective deterrent. The interview can then make reference to that contractual obligation.

Many companies additionally seek to restrict competition from departing employees who may directly or indirectly transfer trade secrets to an incumbent competitor or who may set up shop based on the knowledge they have learned. While non-compete provisions in employment contracts are lawful if properly drafted, one must be careful to ensure that the restrictions are not so broad as to effectively preclude the former employee from making a living at his chosen profession.

Remember… trade secrets are irretrievably lost once disclosed. An effectively drafted employment contract coupled with an exit interview can help maintain those secrets.