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TECHWORKPLACE
by Jeffrey L. Berger, Esq.
Jeffrey L. Berger
specializes in management-side employment and business law, and related litigation in
Washington, D.C., and nationally. Questions and comments on the TECHWORKPLACE are
encouraged. Other articles are available at www.bergerlaborlaw.com.
KEEPING YOUR SECRETS SECRET IN THE WORKPLACE
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In the sci-fi spoof, Men In Black,
extraterrestrial crime fighter Tommy Lee Jones simply flashes his 21st century wand to
erase human memories of top secret events. In the real world of high tech business,
protecting confidential information is not that easy. Indeed, with the explosive growth of
idea and information-based businesses, disputes over intellectual property have
skyrocketed. A growing number of IT and bioscience companies are using employee
non-competition agreements, confidentiality clauses, and internal security procedures to
protect sensitive information. While these methods were difficult to enforce in the past,
recent court decisions have strengthened their application to high-tech companies, so long
as the provisions are not unreasonably vague or restrictive. Nonetheless, to avoid
alienating potential applicants in the fiercely competitive high-tech job market,
employers must be sensitive to employee concerns regarding future mobility and the desire
to share their ideas.
Non-competition Restrictions -- Agreements not to compete are
most commonly used and enforced against employees who have access to confidential
information or close contact with customers. While there are differences among state
courts, local judges will generally uphold a covenant if it 1) is confined to an area and
duration reasonably necessary to protect the business, and 2) does not impose an undue
hardship by prohibiting the employee from earning a living in his or her field. Since many
technology companies compete in global markets, businesses must assess the geographic
scope of the non-compete relative to their market position and the employee’s ability
to affect it. In certain instances a worldwide restriction in a narrow product line may be
enforceable, though in many cases a regional restriction would be more appropriate.
Similarly, while a two-year limitation has been a benchmark for non-competes, the useful
life of much information in rapidly evolving technologies, and the corresponding
enforceable duration for restrictions, may be a matter of months.
Identifying Trade Secrets -- In order to protect trade secrets,
employers and employees must understand what can be covered. Whether a legally protectable
trade secret exists involves: the extent it is known outside the business, the steps taken
to protect secrecy, the value of the data to the business and its competitors, the effort
and expense in developing and protecting the data, and the ease with which it can be
properly acquired by others. Many new entrepreneurs make the mistake of copying broad
non-compete and confidentiality provisions from other companies. However, unless these
provisions are specific and reasonably drawn, they afford little protection. On the other
hand, even in the absence of a non-competition agreement, a well-designed confidentiality
restriction may effectively preclude an employee from working for a competitor. This is
increasingly the case with courts upholding the "inevitable disclosure
doctrine," which assumes that even the most well-intentioned ex-employee will not be
able to avoid disclosing secrets if employed by a competitor. Thus, employers and
employees should pay close attention up-front to their business and contractual
relationship, as it could have far-reaching future implications.
In practice, effective non-competition and trade secret
provisions are part of a dynamic process, and must reflect the information, products, and
employment relationship at issue; boilerplate clauses do not work. Parties should be open
to creative negotiation when beginning and ending employment. Occasionally, departing
employees act as a win/win catalyst for their former and new employers, who may end up in
a joint venture centered around the trade secrets at issue. Nonetheless, whether
negotiation or litigation is the path to protecting a company’s trade secrets, those
who are prudent and proactive usually prevail.
Copyright © 1998 Jeffrey Berger
REPRINTED FROM:
TECHGAZETTE - July 1998, Vol. 1, No. 7
The Berger Law Firm, P.C. 1825 Eye St. N.W., Suite 400, Washington, D.C. 20006.
Phone: (202) 861-1361 Fax: (202) 861-1362
Legal advice is case specific and is not intended to be provided by this article.
The Berger Law Firm, P.C. may not be held responsible for any consequences
that may arise in connection with the use of or reliance on the information provided.
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