Dealings with Vendors Shouldn't Expose Trade Secrets
The risk of such litigation can be greatly reduced by following these steps:
Conduct a trade-secret audit. All companies should know what their most-valued business information is, information their competitors would love to obtain. Take time to document specifically this information. In the event there is ever litigation over the disclosure of trade secrets, this will serve a company well. Many a lawsuit has been thrown out because the plaintiff couldn’t adequately identify its trade secrets.
Improve the vendor-invitation process. Employees are often awed by new technology that promises to make their jobs easier, and they are quick to ask vendors to visit. Unfortunately, these employees fail to involve senior management, research and development departments, and the information technology staff to ensure a product fits in the company’s big picture. Companies should designate one employee to coordinate vendor visits and product demonstrations, and this person should ensure appropriate departments are involved to help decide whether to have the demonstration and whether the product is a good fit.
Do not maintain a public visitor’s log. Otherwise, a vendor can see a list of all recent visitors. The list generally includes reasons for visits, allowing vendors to see what other products a company is evaluating and what the company is working on. The vendor can share this information when visiting your competitors.
Be careful what you sign. Vendors often ask companies to sign nondisclosure agreements, which should always be reviewed by senior management and, if possible, in-house or outside counsel. Problems arise because the agreements tend to be too general. Some agreements say everything disclosed by the vendor is confidential, even if the rest of the world may already know it. By signing an overly broad agreement, companies take on far more obligations than they should and can accidentally restrict their own abilities to develop similar products. Senior management and attorneys can help make these agreements more specific and make sure appropriate exceptions are included for matters of general knowledge, information already known to the company, and plans that are already on the company’s drawing board.
Have your own nondisclosure agreement. Vendors often need to know some degree of a company’s sensitive information to ensure their product is a good match. Why agree to keep a vendor’s information secret if they are not willing to do the same for yours? Any nondisclosure agreement should be mutual, and it should describe the types of sensitive information to which the vendor is being granted access. Requiring the vendor to sign a nondisclosure agreement also imparts the message that trade secrets are a serious matter, further reducing the risk the vendor will disclose the information to others.
- Keep detailed records. Companies should keep track of each vendor visit, identifying employees the vendor met, and describe all communications.
These steps will reduce greatly the risk of further litigation. If such litigation does occur, these steps will greatly increase a company’s chance of prevailing.