September 28, 2020

Volume X, Number 272

September 28, 2020

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September 25, 2020

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Identifying Trade Secrets: The First Step to Protecting Employers’ Competitive Advantage

Employers should be able to definitively identify their “trade secrets” and non-public information.  Indeed, employers may miss out on opportunities for relief from misappropriation of their trade secrets by former employees and competitors if they do not take time to specifically identify and understand their trade secrets.  Before an employer can effectively protect against the theft, disclosure, and misuse of its trade secrets, it must first clearly understand what is—and what is not—a trade secret.  Once the trade secrets are identified, employers should take careful steps to protect trade secrets and confidential information from competitors, as well as departing employees. 

What are trade secrets?

To begin, anything that gives an employer a competitive advantage may be a trade secret.  Trade secrets are a subset of an employer’s confidential information, and can include information about customers or clients, business methods, pricing data, machinery, marketing strategies, techniques, formulas, processes, or virtually anything else that is secret, unique,  and valuable to the employer.  Considered this way, every employer inevitably has some potential trade secrets. 

Another way to recognize possible trade secrets is by evaluating who has access to the information.  For example, if the information is subject to measures to maintain its secrecy, such as limited physical or electronic access, it may be a trade secret.  Alternatively, if the employer uses contracts with its employees and business partners to protect the confidentiality and limit the disclosure of the information, said information may very well be a trade secret, too. 

What qualifies as a trade secret?

To qualify as a trade secret, the information must generally 1) be subject to measures to maintain its secrecy and 2) derive independent value from being secret.  If the trade secret is not sufficiently protected or becomes public -- even inadvertently -- it could lose its status as a trade secret, decreasing its worth to the employer.  But an employer cannot realistically be expected to adequately protect its trade secrets if it does not first know what it must protect.  That is why it is so important for employers to regularly audit their trade secrets and update their protective measures, as needed. 

Employer takeaways

Departing employees with access to trade secrets pose a significant threat to an employer’s trade secret security, thus necessitating a consistently-enforced protocol to off-board those employees and ensure compliance with any continuing post-employment obligations owed to the employer.  However, upon discovering that a departed employee may be misappropriating trade secrets, courts expect swift action from the employer to protect its assets—including, early, specific identification of exactly what the employer considers as its stolen trade secrets. 

With proper planning, including routine auditing of its trade secrets and protective measures, an employer can position itself for greater success if it chooses to pursue relief for the theft in court.  Employers with questions regarding trade secret identification or protection should consult with competent counsel.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume VIII, Number 234

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About this Author

Emma R. Schuering, Polsinelli PC, FMLA Matters Attorney, labor and employment lawyer, kansas city
Associate

For each engagement in which Emma Schuering is involved, she seeks to provide concise and articulate legal counsel that aligns with clients’ business objectives. Emma represents employers in a variety of employment litigation matters, including the enforcement of non-compete agreements and FMLA claims. She also focuses her practice on appeals and dispositive motions.

Prior to joining Polsinelli, Emma worked as a law clerk at the Missouri Court of Appeals, Southern District, in Springfield, Missouri. During her tenure, Emma was exposed to number...

816.360.4281
Shareholder/ Practice Chair

As Chair of the firm's Restrictive Covenants & Trade Secrets practice, Eric Packel is a trial lawyer who represents local and national businesses in complex employment litigation, particularly claims brought under the Uniform Trade Secrets Act, and a variety of employee and shareholder related claims. For many of these clients, Eric also oversees and directs their general legal needs and consults them in their overall business strategies. Over the course of 20 years, Eric has tried cases to juries in five states, including:

  • Violations of the Uniform Trade Secrets Act
  • Claims brought under Federal and State anti-discrimination statutes 
  • Breach of Operating Agreements 
  • Breach of Employment Agreements 
  • Breach of fiduciary duties     
  • First Amendment 

Regularly leading a team that handles all of the employment discrimination allegations brought against a large healthcare institution, which employs more than 7,000 employees, Eric has defended the institution in multiple Charges of Discrimination before the Equal Employment Opportunity Commission and a state Human Rights Commission for the last 5 years. To date, none of those Charges has resulted in a “Cause” Determination. He also works with information and security, food and ingredient manufacturing, and financial services cases. 

816- 360- 4249