| How to Protect Trade Secrets in the Workplace | Business Law Research Paper | Anthony Arrieta
11-27-2015 |

Trade secrets
First let’s address what a “trade secret” is. It is very hard to get an exact definition of what these are but trade secrets have characteristics which most state statutes or common law recognize. They are: * Secrecy * Security * The value of the Information, and * Ease of Duplication
A customer list is a classic example of information that might be considered a trade secret. The list, by itself, would probably not be a protected trade secret. It could only be protected if the customer list is not “readily ascertainable” from sources outside the particular company. For example, a list of customers revealing their monthly purchases would more likely constitute a trade secret. The mere listing of customer names and addresses which could be obtained from a telephone book, would probably not constitute a protected trade secret.
Protecting trade secrets in the workplace is a very important part of running a successful business. Keeping parts of your business secret will differentiate you from the rest of your competitors and if you are succeeding in the industry it will keep you at the top of the industry. Successful companies stay on the top because they protect their most valuable information. Companies like Coca-Cola have protected their “secret” formula for 125 years (Coca-Cola, 2015). This is not the only reason that they have been the industry leader in soft drinks but it is a huge advantage that they have managed to keep. Now is it completely secret? No but Coca-Cola has managed to keep the formula protected. This trade secret is something that helped keep them ahead of the competitors in their industry for 125 years. This is just one company that has publically shown that they are protecting secrets. It would be reasonable to say that every company in the business world is working to protect secrets in their company. We could also say that every fortune 500 company has hundreds of secrets that they work very hard to keep, these are part of the reasons they are as successful as they are. There are many more ways and steps to protect trade secrets than putting it in a vault like Coca-Cola (Coca-Cola, 2015). This paper is going to address some important steps that every business should follow to protect their own secrets. These steps could mean the different between being successful and innovative and being unsuccessful and dead.
Updating Policies
The first step we are going to discuss is making sure that you update all of your policies. By updating any relevant employee polices you can take another step to preventing employee theft or improper disclosure of company trade secrets. So if you are taking a look at the status of your company policies, which ones should you update? Some key policies to update would include electronic policies, IT acceptable use policies, and other policies that address the use of email, internet, social media, and mobile devices (including “bring your own device” policies) (Fredrikson & Byron, 2015). Also it would be ideal to update confidentiality and trade secret protection policies, and include a policy that addresses removable media, such as flash drives (Fredrikson & Byron, 2015). These policies are the ones that need to be addressed first because they are the easiest way for someone to release your information. So if you keep your policies updated, then you will protect yourself legally.
Here is an example of a case where it shows the importance of keeping your policies updated. In Stengart v. Loving Care Agency, Inc., 990 A.2d 650 (N.J. 2010). During the course of litigation with a former employee, a company hired a forensic vendor to obtain all data stored on a company laptop used by that employee. During her employment, the former employee had used her company to access a personal, password-protected email account through which she exchanged emails with her attorney. The forensic image captured those personal emails and the company and its attorneys wanted to use the emails in the defense of the lawsuit (Fredrikson & Byron, 2015). Unfortunately, the company’s electronic use policy was found lacking. The company’s policy stated that no emails were considered private or personal, and relayed that the company had the right to review, access, and disclose all matters on the company’s system (Fredrikson & Byron, 2015). With that being said, the court found the company’s policy to be too vague to put the employee on notice that a personal email account exchanging attorney-client privileged communications could be accessed and read (as compared to a work email) (Fredrikson & Byron, 2015). Because of this, the emails had to be returned and they could not be used in litigation. Because the company’s policy did not adequately address the company’s right to monitor personal emails accessed on the company’s system, the company lost a key avenue to discover relevant evidence (Fredrikson & Byron, 2015). In a trade secret case, that source of evidence may have been critical, and the outdated and vagueness of the policy language created a bump in the road for the lawsuit.
Agreements
The next key step is to get your agreements right, this will focus on protecting trade secrets through the use of employee confidentiality, nondisclosure, noncompetition and nonsolicitation agreements (Publishing, 2014). These agreements can provide great protection, but they can also be full of tricks and traps if not well-drafted or properly executed (Fredrikson & Byron, 2015). Multi-state employers will be at a higher risk if their agreements are not well drafted because the laws within different states vary. For example, some states such as California and North Dakota prohibit non-compete agreements on almost all circumstances and many other states have unique and idiosyncratic laws limiting or restricting employee confidentiality and non-compete agreements (Fredrikson & Byron, 2015). One thing that you need to keep in mind as it relates to confidentiality agreements, is that if “everything” is confidential, then nothing is. While you should have these agreements, federal agencies, such as the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB) are attacking overboard confidentiality provisions (Fredrikson & Byron, 2015). They argue that such provisions interfere with employee rights under federal labor and employment laws (Fredrikson & Byron, 2015).
For example, in Muse School CA v. Trudy Perry, a NLRB Administrative Law Judge (ALJ) ruled that the MUSE elementary school’s confidentiality policy violated the National Labor Relations Act (NLRA) because its prohibition against disclosing confidential information included not only MUSE trade secrets and confidential business information, but also information about MUSE employees and “compensation paid to MUSE owners and employees.” (Fredrikson & Byron, 2015). This type of restriction, according to the NLRB, “suppresses” employees’ right under the NRLA to discuss their wages and other terms and conditions of employment, and is unlawful (Fredrikson & Byron, 2015). Additionally, while the school argued that it could not have violated the NLRA because it never actually enforced the confidentiality language, the ALJ disagreed, ruling that even maintaining such language is a violation of the NLRA.
So after hearing one example of a poorly crafted agreement we can say that having well-crafted, enforceable contracts in place with your employees is a critical part of any trade secret protection program. This also means doing all of your homework when it comes to following the laws set in place by the NLRA and NLRB, and not stepping overboard when it comes to the protections that these acts and federal agencies have put in place.
Workplace Culture
The next step would be to establish a workplace culture that treats confidential information like it is actually confidential (Fredrikson & Byron, 2015). This will help prevent inadvertent disclosures, as well as deter intentional ones. This will also play a pivotal role when seeking to support a claim for trade secret misappropriation. If an employer cannot show that it took reasonable steps to maintain the secrecy of its information, it may not be able to establish a claim for misappropriation (Fredrikson & Byron, 2015).
For example, in Alpine Glass v. Adams, 2002 Minn. App. LEXIS 1392 (MINN. Ct. App. 2002), an employer failed to provide employees a written policy prohibiting them from taking home confidential information and the company did not appropriately limit dissemination of confidential, “found that the employer failed to undertake any effort to keep its information confidential. As a result, the employer did not have a protectable interest in information it believed was confidential (Fredrikson & Byron, 2015). The first part of establishing a culture of confidentiality is to “talk the talk.” (Fredrikson & Byron, 2015). This means you need to take the necessary steps in training employees and managers on how to protect confidential information and why it matters by explaining and giving examples of confidential and trade secret information. With this, as an employer you should establish “dos and don’ts” regarding data security, focusing on both intentional and inadvertent disclosures as well as appropriate and inappropriate use. Also employers should warn the employees of the consequences of these disclosures (discipline, termination, and possibly legal action) (Fredrikson & Byron, 2015).
When we talk about the “walk the walk” portion of this step, this means actually treating confidential information like it is confidential. If the employer places its information in a public domain, then they can waive its protectable interests (Fredrikson & Byron, 2015). So each file should be placed in secure locations. Also it is important to only give access to these files to employees who need the access (Publishing, 2014). This means that you should be constantly monitoring which employees have access and why they have the access that they do. This will keep the information more secure because employees who do not need the files won’t have access to the secure information. Also you should always use watermarks with labels like “CONFIDENTIAL” or “TRADE SECRET” this will only help you more when it comes to a legal issue.
Employee Training
Next when we are talking about training employees, this means that employers should provide confidentiality training sessions to employees with access to protected information (Fredrikson & Byron, 2015). This will remind them of their confidentiality obligations and the importance of protecting the company’s protected material. Along with confidentiality training sessions, employers should also give these employees periodic reminders regarding their confidentiality obligations, which the employees are then required to acknowledge in writing (Fredrikson & Byron, 2015). This is just another way to protect yourself when it comes to legal protection for your business. Ultimately, these steps will help an employer demonstrate in court that it has taken active steps to protect confidential information (Fredrikson & Byron, 2015).
Social Media
The next step is to watch out for social media pitfalls (Fredrikson & Byron, 2015). Social media represents a unique new challenge related to the protection of confidential and trade secret information. This biggest thing is that it is a relatively new concept. Particularly as far as the courts are concerned, and the law is still trying to catch up.
For example, in Cellular Accessories for Less v. Trinitas, LLC, the company claimed a former employee’s LinkedIn contacts constituted trade secrets and should be protected as such. In that case, privacy settings were set to keep his contacts secret or not (Fredrikson & Byron, 2015). As a result, it was impossible to determine the very basic concept of whether the information was actually secret (Fredrikson & Byron, 2015). This is a great example of the need to be thoughtful about addressing how your company and your employees are using social media. In this instance, had the corporation prohibited an employee’s ability to upload company contacts to LinkedIn via a policy or an agreement with the employee, it would have had a better opportunity to prove that it took steps to keep those contacts confidential (Fredrikson & Byron, 2015). Another example, is employees venting about work on media sites like Facebook or Twitter. When this happens, they could be inadvertently or intentionally disclosing confidential product information, protected health information, strategic marketing information, or sensitive/non-public financial information (Publishing, 2014). Employers must tread carefully before terminating an employee for their social media posts because there are many “Facebook firing” cases coming out of the National Labor Relations Board.
Red Flag Behaviors
Next you need to identify red flag behaviors (Publishing, 2014). As the employer, it can be very hard to stop a behavior like printing off confidential information and taking it home, or maliciously deleting or altering information. But here are some characteristics that an employer can look out for so that they may be able to prevent these things from happening: * Greed, financial need. * Feelings of anger/revenge against the organization. So you can investigate problems within the workplace that might cause these things. * Divided loyalty-allegiance to another person, company, or country. * Compulsive or destructive behavior, or family problems: drug or alcohol abuse, other addictive behaviors, marital conflicts, or separation from loved ones. * Employees who were laid off, passed over for a promotion, terminated, demoted, or required to follow a performance improvement plan.
(Fredrikson & Byron, 2015)
These are just a few important characteristics that you could be on the lookout when identifying red flag behaviors. Red flag behaviors that are not identified can result in you losing trade secrets or confidential information and could result in unwanted legal battle and money spent on fighting these battles.
Exit Interviews
The last step that we will cover is making the most of exit interviews (Fredrikson & Byron, 2015). Exit interviews are a standard Human Resource procedure and should be taken seriously and documented accordingly. This is a critical opportunity to discuss the return of property and find out an employee’s new employment plans. There are a few procedures an employer can take have a better exit interview.
First go beyond just asking yes or no and “soft questions (Fredrikson & Byron, 2015). Don’t just ask about the experience the employee had with your company. Ask where the employee plans to work next and in what capacity (Fredrikson & Byron, 2015). If the employee is being honest, you will gain a great deal of insight into what potential exposure of your trade secrets there might be (Fredrikson & Byron, 2015). If the employee is vague or will not answer, this could be a red flag for you. You could then involve your IT department and determine if any information has already been taken or been deleted (Fredrikson & Byron, 2015).
Next you need to ask the employee for all passwords for work-related computers, devices, accounts and files and then change all the passwords. Changing all of the passwords that they have access to should be something that is done before you execute the firing. By doing this, you will be avoiding the possibility of them taking or deleting information out of anger of being terminated (Me, 2015).
Next you should setup a return of property review, whereby the employee discloses all company information or devices in their control. Set up a procedure for their return and set a deadline (Fredrikson & Byron, 2015). Collect all keys, access cards, badges, company credit cards, and other property.
Next have the employee disclose what information they have in paper or electronic format on personal devices, at home, or in cloud based storage. At the end of this, have the employee sign an acknowledgement that all company property and information has been returned (Fredrikson & Byron, 2015).
Make sure you have the protocol set in place for when IT should terminate access and change passwords. Preferably this should be done before the employee is terminated.
Next, if the employee is subject to confidentiality and/or non-compete agreements, remind the employee of their ongoing obligations. Similarly, review any separation or severance agreement to emphasize the obligation to preserve confidential information (Fredrikson & Byron, 2015).
Last, immediately following the exit interview, send the departing employee a letter reminding them of continuing obligations to the company to honor any agreements-including the obligation to not use any company information (Fredrikson & Byron, 2015).
Following these basic steps when conducting an exit interview will help you gage what is going on in the mind of the employee, their intentions, and gain back any access, property, or passwords that the employee had. These things will protect your intellectual property and your trade secrets.
Conclusion
In today’s competitive business environment, employees can “make or break” an enterprise when it comes to intellectual property protection (Sheikh, 2015). When have decided that information is a trade secret, companies must build a strong protection system around such information (Sheikh, 2015). In addition, companies should work to establish a strong loyalty among its employees to make the non-disclosure agreements and non-compete agreements have a better chance of being effective and thus safeguarding its trade secrets. Trade secrets are of the utmost importance to a business. The protection of these secrets could determine the life of your company and how successful it becomes. Business should invest mass amounts of thought and time into building the employee loyalty and protecting the information that your business holds most dear.

Bibliography
Coca-Cola. (2015). Retrieved from Worldofcoca-cola: https://www.worldofcoca-cola.com/media-alert/coca-cola-moves-its-secret-formula/
Fredrikson & Byron, P. (2015). Retrieved from FredLaw: http://www.fredlaw.com/_asset/6050or/trade-secret-10-step-guide.pdf
Me. (2015). (A. Arrieta, Interviewer)
Publishing, N. Y. (2014). Retrieved from DrinkerBiddle: http://www.drinkerbiddle.com/resources/publications/1996/12-step-program-to-protect-employers-trade-secrets
Sheikh, T. (2015). Retrieved from WIPO: http://www.wipo.int/sme/en/documents/trade_secrets_employee_loyalty.html