Graceful Exits

The Defend Trade Secrets Act of 2016 (DTSA) has been touted as a game changer.

Defend Trade Secrets Act of 2016 (DTSA)
Rachel Blue

Rachel Blue

June 26, 2017 01:41 PM

Lawyers in particular get really excited about game changers, even when the change gets more of a workout in legal blogs than it does in providing advice or resolutions for clients. This particular law, which offers plaintiffs the option of filing a federal suit for misappropriation of trade secrets, includes a new civil seizure mechanism that could serve to close the barn door before the horse gets out. Though the seizure provision got a lot of media coverage, it is only available in “extraordinary circumstances” and might not be applicable in more garden variety matters. The rest of the act, though, has very practical applications for companies losing employees that routinely handle confidential information.

Let’s say an employer is faced with layoffs among the engineering or research staff. Ordinarily, an exit interview might be confined to a discussion of severance or benefits packages, but employees working with proprietary information are worth more careful handling. When an employee works with trade secrets on a regular basis and knows they’re about to lose a job, they may be tempted to take information on the way out the door, either as perceived retaliation against the company or as a way to gain an advantage in their search for a new job. Often they may not even realize that information is in fact a trade secret.

DTSA gives a more definitive explanation of what exactly a trade secret is, offering a checklist of what to cover in exit interviews: “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”

DTSA defines misappropriation very specifically, rejects the doctrine of “inevitable disclosure” (the idea that an employee who went to a competitor would eventually disclose knowledge from his old job to his new employer), and specifically says that injunctive relief must be tailored to avoid conflicts with state law over restraints of trade or profession. It may be a useful guideline for employers dealing with the departure of employees who had access to trade secrets in crafting an exit agreement as a litmus test to decide whether future behavior is worth a lawsuit.

For those hoping to avoid misappropriate altogether, here are a few practical exit strategies:

  • Involve the employee’s supervisor and IT staff in the exit interview process. Someone with a good understanding of what the employee had access to and how they accessed it can ask the right questions about proprietary information.
  • Review employment agreements and policies addressing employee obligations to return devices and information and the employee's continuing obligations of confidentiality after departure. Confirm that the employee understands what the company considers proprietary and that confidentiality applies to social media posts and photos.
  • Review personal device policies and disable access to company information if the employee is allowed to keep the device.
  • If the employee had the ability to set passwords to certain files, be sure there is redundancy of access among remaining employees. Change the passwords following the employee's departure.
  • Find out what the employee may have stored on other personal devices at home, in their car, in the cloud, or in hard files offsite. Make it easy for the employee to return things they discover after their departure.
  • Before destroying proprietary information stored on a device, make a copy. For electronic information, include the metadata behind it so that you can determine when and whether information was accessed or edited and whether it was moved, forward, or otherwise stored.
  • Carefully review "personal" files released to the employee before handing them over. Trade secrets could lurk among allegedly personal photos, giving rise to a claim that the company "willingly" released information to the employee.

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