In the movie “Snowden,” the audience watches anxiously as Edward Snowden downloads millions of files in a matter of minutes and then walks out of an NSA facility with the thumb drive hidden in a Rubik’s cube. How much more information could he have acquired if no one was watching? This is the very scenario every business finds itself in today, because telework has changed the way companies must protect trade secrets. Add disgruntled employees to the mix, and you have a recipe for disaster.
COVID-19-related lawsuits so far have primarily focused on employees’ health conditions, terminations or whistleblower activities. But with companies resuming operations, a new era is approaching. Companies are starting to experience possible leaks of proprietary information and the loss of loyal customers for no apparent reason. With courts closed or running on skeletal staffs, it is particularly important for companies to take action now to prevent the costly loss of clientele and information.
A recent case provides a sobering example of how companies already crippled by COVID-19 have lost confidential information and employees during the lockdown. In Marina District Development Company LLC v. AC Ocean Walk LLC et al., a case filed in federal district court in Nevada, Atlantic City's Borgata Hotel Casino & Spa sued Ocean Casino Resort in connection with its hiring of five Borgata marketing executives. Borgata alleged that Ocean Walk and several associated individuals intended to cripple Borgata's casino operation and misappropriate its business relationships and trade secrets.
The court granted a partial restraining order based, in part, on one individual defendant’s possession of his work cell phone demonstrating that he was contacting customers. However, the court denied relief against three other individual defendants because they had not signed confidentiality agreements while employed with Borgata and because Borgata failed to show that the former employees were using intrinsic knowledge of trade secret information.
This case shows the importance of proactive measures by employers to protect trade secrets and prevent employee raiding while employees are teleworking. These measures include:
Requiring appropriate employees to sign independent confidentiality and employee nonsolicitation agreements.
Ensuring that employees have electronic devices equipped with technology that allows the company to remotely wipe the device if necessary.
For employees with access to significant client contact or other proprietary company information, requiring employees to use separate devices for work and personal use.
Revising and managing internal confidentiality policies.
Updating employee termination and exit procedures to include confirmation and follow-up that departing employees have returned or deleted company confidential information.
Acting fast. If an employer learns that an employee has absconded with confidential information, investigate and request it back in writing immediately. Otherwise, the information may lose its confidential/trade secret designation.
The end game for all companies is to lock down important trade secret information that has been developed through years of investment and goodwill. Without the right plan and strategy to protect company assets, remote work necessarily jeopardizes the safety of this information.