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Protecting Trade Secrets and Confidential Information From Disgruntled Current and Former Employees

The Department of Homeland Security reports that disgruntled current and former employees have increasingly engaged in cyber attacks, costing employers between $5,000 and $3 million per attack.  Businesses properly worry about the harm that former employees may cause when they take trade secrets or confidential information as they leave the company.  Well-written and enforced covenants not to compete and confidentiality agreements can deter employees from attempting to take this valuable information.  However, protecting trade secrets and confidential information begins during the hiring process itself and continues while employees work for the company.

For example, employers should advise new employees that they are not to bring trade secrets or confidential information of their former employers with them to their new job.  This should include a written acknowledgment that affirmatively states that employees have not brought any confidential information with them.  This practice sets the tone that valuable information will be handled properly within the company.

Once the employee begins working, employers should limit electronic and physical access to information to those employees who need to know the information to perform their jobs.  If important information is available to those inside the company who do not need to know it, the risk of disclosure increases, and it becomes more difficult to prove in court that the information is truly confidential if the information is widely known within the company.  Limiting access also means closing accounts employees no longer need to do their jobs.

The company handbook should also include a section that informs employees what qualifies as trade secret or confidential information and how to handle this information.  Again, collecting a signed acknowledgment form from every employee that they have received a copy of the handbook is important.

When an employee leaves employment, the company should give the employee a letter which describes his or her continuing obligations to the company.  The letter can provide the employee with a copy of any covenant not to compete or confidential information policy that he or she signed during employment.  The letter can also clearly communicate to the employee which items are confidential or trade secrets.  

The company should collect all company property such as identification cards and badges, laptops, phones and other electronic access devices, and have the departing employee sign a written acknowledgment that all company property has been returned.  The company should also change passwords to servers and networks after the departure of key IT personnel.

Other steps to protect confidential information and trade secrets may be appropriate depending on the size of the company and the type of information involved.  If you would like further information on this topic, please contact any member of MacDonald Illig's Emerging Technologies Group. 

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