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Trade Secrets and Intellectual Property

Fierce competition epitomizes today’s global business environment. Companies strive to maintain every possible competitive advantage over their competitors. Similarly, they seek to ensure the maximum return from their investments — whether in new products, new customers, or employee training.

The loss of any of those advantages, no matter how small, can have real consequences to a company’s bottom line. Today, an employer’s competitive edge increasingly consists of “intellectual property” — that is, technical know-how, customer lists, and other intangibles. Fortunately, well-counseled employers can minimize the extent of the loss by taking preventive actions.

State-by-state comparison of 50 employment laws in all 50 states

Restrictive covenants and confidentiality provisions
Restrictive covenants and confidentiality provisions generally provide the most effective means to protect those important advantages and investments. Restrictive covenants can encompass a number of different types of restrictions from non-compete agreements to non-solicitation agreements to anti-raiding provisions.

Further protection of employer trade secrets
Most states have enacted statutory protections for trade secrets (some states continue to recognize common-law trade secret claims in addition to the statutory claims, while other states find the common-law claims preempted by the statutory claims). The statutory language may vary depending on the state, but the protections generally are similar across states.

Not all confidential information rises to the level of a trade secret, but many laws define “trade secret” broadly to include formulas, customer lists, financial information, and manufacturing processes.

Likewise, most statutes don’t require that companies take the best effort to maintain secrecy — which often would be a restrictive covenant or confidentiality agreement — but instead require only “reasonable” efforts under the circumstances. That means that at a minimum, access is limited to those within the organization with a “need to know” and the employer made other reasonable efforts to maintain the information’s confidentiality.

If a company can establish the statutory elements, most trade-secret statutes will allow for both monetary damages and injunctive relief. Depending on the situation, it may or may not result in a former employee being barred from working for a competitor.

Bottom line
The lack of contract protections doesn’t leave a company defenseless, particularly if a former employee or a competitor has engaged in bad behavior. If a company believes that a former employee’s employment with a competitor will result in the loss of confidential information and/or investments and a corresponding harm to the company, it should carefully review the situation and consult with an attorney.