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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: |
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