Checklists Employment Law Legal Topics

Stop Trade Secret Thieves Before They Leave

ThinkstockPhotos-482975110One of the most likely times to lose trade secret protection occurs when an employee leaves the company. If there are feelings of resentment, the employee may want to harm the employer, or the employee may mistakenly feel that he or she will be more valuable to a new employer by bringing such information. Regardless of reason or intention, companies need a trade secret protection plan in place to prevent trade secrets from leaving with their employees. Here are some tips for adding protection to the exiting process.

Use the exit interview. Before employment is terminated, the company should conduct an exit interview between the departing employee and the employee’s supervisor or human resources representative. At this interview, the supervisor or other representative should reinforce the company’s trade secrets protection policies and the employee’s nondisclosure obligations and should collect from the employee any of the company’s property that previously wasn’t returned, such as trade secret materials (engineering notebooks, business plans, marketing plans, customer lists), keys, passcards, computer disks, thumb drives, identification badges, and any other tangible items that the employee may have kept at home or on a personal computer for his or her convenience. The employee should also return all paperwork, files, computer information, documentation, and other materials obtained by virtue of his or her employment. Because IT personnel have greater access to company secrets, when they leave the employer should ask them to sign a separate agreements acknowledging that company domain names, passwords, and user data are company property.

Get a signed termination certificate. The employer should ask the employee to reaffirm in writing, either in a termination certificate or severance agreement, any prior confidentiality or nondisclosure agreements that the employee has signed. Even if the employee refuses to sign such a certificate, the company has still protected its interests by indicating to the employee that it takes such issues seriously.

Keep your eye out for indications of theft. Every employee with access to trade secrets is a potential theft risk, and it may be the employee you least expect. In fact, some employees don’t see trade secret theft as unacceptable because, for example, the information wasn’t really secured by the company, or the employee won’t be getting any financial gain from its theft. This is why it’s so important that all employees be given the exit interview and asked to sign the termination certificate.

But there may be ways to tell whether a particular employee is more likely to take off with company secrets. To help spot a trade secret thief, the Federal Bureau of Investigation provides the following list of warning signs that may indicate that employees are spying or stealing secrets:

  • Employees work odd hours without authorization;
  • Without need or authorization, they take home proprietary or other information in hard copy form or on thumb drives, computer disks, or e-mail;
  • They unnecessarily copy material, especially if it is proprietary or classified;
  • They disregard company policies about installing personal software or hardware, accessing restricted websites, conducting unauthorized searches, or downloading confidential material;
  • They take short trips to foreign countries for unexplained reasons;
  • They engage in suspicious personal contacts with competitors, business partners, or other unauthorized individuals;
  • They buy things they cannot afford;
  • They are overwhelmed by life crises or career disappointments; or
  • They are concerned about being investigated, leaving traps to detect searches of their home or office or looking for listening devices or cameras.

For guidance on conducting trade secret audits and creating trade secret protection plans, turn to CEB’s Trade Secrets Practice in California, chap 4A. For a sample Employee Termination Certificate and related letters, check out CEB’s Advising California Employers and Employees §§11.37-11.41.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

5 replies on “Stop Trade Secret Thieves Before They Leave”

I practice only criminal law, however I like reading your posts. This one was a great one!!! Thanks for posting it.

Add your comment to the blog post

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s