thumbnailCAI6JIYHHow do you, the cautious employer, protect yourself from trade secret theft?  One way is through employment agreements.  Many of the court cases involving employee theft of trade secrets include employment agreements with intellectual property terms.  We believe that courts are more likely to conclude that the actions by a former employee are or will be a misappropriation of trade secrets if employment agreements are in place that include terms to protect those trade secrets.  Since many employers use non-employee independent contractors, the contracts for those non-employee contractors can include similar terms.

1. Include a non-disclosure clause in your employment agreement.  A non-disclosure clause is a commitment from the employee to keep your trade secrets secret.   At a bare minimum, each employment agreement should include a non-disclosure clause.

2. For an employee who is engaged in research, engineering or the creation of new products or ideas, the employment agreement should specify that the employee presently assigns, at the time of the employment agreement, the employee’s future rights, including patent rights, to any inventions or other intellectual property that the employee creates during the period of employment and that relate to the employee’s work or to your business.  While this is not a trade secret issue, it is an intellectual property issue.  A present assignment of future inventions can prevent endless headaches later, when an inventor of a valuable product leaves without assigning the invention to your business.

3. How will you know about your employee’s inventions?  Include a contract term that the employee is obligated to report the employee’s inventions relating to the employee’s work or to your business.

4. In jurisdictions that allow it and if the labor market will support it, consider a non-compete clause.   A non-compete clause is a contract term by which the employee agrees not to compete with your business, usually for a specified period of time after leaving your employ.  Pennsylvania allows non-compete clauses, but not all states do.  Non-compete clauses are not appropriate for all employees and the courts will not enforce the non-compete clause if the restrictions on the employee are unreasonable – indentured servitude has passed out of fashion.

5. The employment agreement should include the Defend Trade Secrets Act notices mentioned elsewhere in this newsletter.  The notices increase the remedies available to the employer.

Do your employment agreements and contracts need a polish after the Defend Trade Secrets Act?  We are happy to help.

— Robert Yarbrough, Esq.