While operating under a well-drafted employee manual helps businesses save labor costs, implementing a comprehensive intellectual property protection plan for your company reduces risk by preventing thousands of dollars in litigation costs if your business’ intellectual property is misappropriated or infringed by current or former employees.
There are several methods of protection available, depending on the category of intellectual property that a business seeks to protect. A businesses’ intellectual property can be protected by copyright law, patent law, trademark law, or it could be considered a trade secret. Copyright law prevents copying of the specific expression of an idea; however, it does not protect against someone expressing the same idea in a different way. Trademarks protect a company’s brands of goods and services that are used in commerce. Patents protect certain types of ideas, such as new and innovative inventions.
A company should consult with an attorney in order to determine the best method of protection for its intellectual property, as there are pros and cons to each method. Copyright, trademark and patent law are all regulated under federal law and certain requirements must be met in order to receive protection. Whereas, trade secret law is typically regulated under state law, but it allows businesses to protect confidential or proprietary information, but only if the information is kept private.
Trade Secret law may offer the best protection for a business’ confidential and proprietary information
Even though an idea or invention may be able to be copyrighted or patented, a company may decide that it is in its best interest to treat the idea or invention as a trade secret. Under Texas law, a business may consider a broad range of types of information to be its trade secrets, so long as that information gives it an advantage over competitors who do not have that information, and so long as it accepts the obligation of taking measures to guard the information from release.
- Trade secrets can be:
- Computer Programs (including programmer’s notes)
- Business Know-How
- Specifications, Bill of Materials, Recipes, and the like
- Processes (including flow charts)
- Formulas (including algorithms)
- Distribution Sources
- Business Methodologies
- Customer Information (lists and preferences)
- Financial Information
- Vendor/Supplier Lists (not publicly available)
- Business and Marketing Plans
- Product/Service Pricing
- Personnel Information
- Machinery (customized or unique to the company)
Five simple ways to prevent employee misappropriation of trade secrets:
The goal of trade secret law is to prevent competitors or former employees from using trade secrets that the company has sought to protect. By following a few simple steps, a company can protect the confidential or proprietary information that provides its competitive advantage in the industry.
- Have a written policy and audit procedure in place that identifies the company’s specific proprietary or protected trade secrets and other intellectual property;
- Implement a trade secret protection plan that segregates the trade secrets, including:
- Labeling documents, items and software containing trade secrets
- Using notice measures
- Using physical security barriers
- Upon hiring and periodically thereafter, educate employees about the company’s intellectual property;
- Require employees with access to vital company information enter into written restrictive agreements with regards to confidentiality, non-solicitation, and non-competition; and
- Conduct exit interview with departing personnel:
- Review the terms of the nondisclosure agreement with departing personnel;
- Remind employee/contractor of duty not to use or divulge company’s trade secrets;
- Require that the employee sign a termination certificate, if possible, acknowledging employee’s/contractor’s understanding and duty not to disclose trade secrets or confidential information;
- Obtain trade secret materials and documents in the employee’s possession or control, including, hard copies, diskettes (and other storage materials), home computer files, home office files, laptops, cell phones, etc.; and
- Require that keys and access cards be returned.
Authored by: Catherine Hough
