Trade Secret Violations and Protections Issues
05.15.08 (4:49 pm) [edit]Recently, a growing number of trade secret lawsuits involving former employees have been reported. This brings to light the practice of some companies and business, which take vital trade information by tapping former employees of their competitors.
Typically, a violation of trade secret occurs whenever information that has potential or actual economic value to a company has been illegally obtained to challenge competitors in business.
Contrary to what many believed, trade secrets are not merely confined to confidential, technical, or sophisticated data and information but also to customer lists, customer contracts and marketing strategies.
Who can be sued for the violations?
Two categories of persons may be considered as “the usual suspects” for trade secret violations.
1. Employees who either negligently or intentionally violate employment agreements or allow a trade secret to become known by a person who is not otherwise allowed access to the trade secret.
2. Persons who uses the trade secret information to manufacture a product that competes with the original owner of the trade secret
Without them knowing, companies who elicit competitors’ trade secrets from new employees coming from their competitors, or allow their new employees to use trade secrets of their former employers, are actually violating trade secret laws. (for example, in the case of Surgidev Corp. v. Eye Technology, Inc. (648 F. Supp. 661)
Similarly, if an employee uses trade secrets he has learned from his former employers without their knowledge, he can be held equally liable for trade secret law violations.
When this happens, the owner of the trade secret may be entitled to an immediate injunction and to damages compensating it for the loss, plus punitive damages and attorneys’ fees.
How does one protect himself from trade secret theft and unlawful use of company information?
One way of preventing this is to tell potential and current employees clearly that your company will not allow employees to use confidential information acquired from their former employers.
In order to do this, an employer must draft two vital documents defining its rules on the use of information, trade secret policies and other governing rules. These documents must form part of an employment agreement that new workers must sign prior to being hired and employed.
In this respect, the non-disclosure and non-compete agreements are two of the common methods used by businesses to prevent trade secret violations.