How to Protect Your Business’s Proprietary Information

By Leiza Dolghih

Every successful business has some information that gives it a competitive advantage – its “secret sauce” so to speak. It can include customer lists, customer preferences, financial data, business or marketing plans, formulas, or technical information, which, if known to a competitor or general public, would destroy the business. So, how can a company ensure that its secret and proprietary information is legally protected? Here’s how:

1. Identify Your Trade Secrets and Proprietary Information.  Before you start implementing any security measures, you need to identify what information you are trying to protect. Ask yourself two questions:  (1) what information do I have that gives my business a competitive advantage? and (2) is this information publicly available? As a starting point, the Texas Uniform Trade Secrets Act defines “trade secrets” as “formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers.”  This information, however, is not likely to qualify as proprietary if it is “commonly known” or available in the public domain.

2. Implement Access System on the “Need to Know Basis.” Limit the access to the proprietary information only to those employees who need it in order to perform their jobs; password-protect employees’ computers and phones; and, if the information is maintained in a hard format, make sure the filing cabinet or the room where it is stored is locked.

3. Require Key Employees to Sign Non-Disclosure Agreements (NDAs). Employees with access to confidential information should be required to execute NDAs prior to receiving such information. A NDA can be a part of an offer letter or employment agreement or it can be a free-standing contract.

4. Require Third Parties to Sign Non-Disclosure Agreements.  If you are sharing your business’s proprietary information with another party, such as your supplier, marketing agent, join venturer, etc., make sure that they execute a NDA as well.  Ideally, you should not be sharing your proprietary information with anybody who has not executed a NDA.

5. Have a Written Confidentiality Policy. Your employee handbook and/or company policy should contain a statement regarding what information the company considers to be confidential, prohibition of disclosure of such information, description of the consequences of such disclosure, such as disciplinary action, and a requirement that all key employees execute a NDA.

6. Provide Training Regarding the Confidentiality Policy and Enforce It. Such training can remind employees not to discuss the confidential information in public, not to access such information from public computers, and alert them regarding various ways of inadvertent disclosure that they can encounter in their day-to-day lives.

7. When Key Employees Leave, Have Them Sign A Non-Disclosure Confirmation Form, Obtain Information About Their New Company, and Conduct Forensic Imaging of Their Computers.  When key employees leave, during the exit interview have them sign a statement in which they acknowledge that they have not taken any of your confidential information.  You should also ask them about where they are going, what duties they will be performing there and other information that will help you assess the likelihood of them using the company’s confidential information at their new company.  Finally, it is worth paying a few hundred dollars to have their computers, iPads, etc., forensically examined to make sure that they have not printed, emailed themselves or otherwise took any of the company’s proprietary information.

8. If You Suspect That an Employee Is Stealing or Has Stolen Your Proprietary Information, Act Quickly. The more time passes between you discovering that your employee has taken or is using your confidential information and your actions, the less likely a court is to find that the information was a “trade secret.” In other words, if you are not trying to prevent other parties from using your information, then why should the court do so?

 Leiza Dolghih is a business and employment attorney with Godwin Lewis PC specializing in non-competition, non-solicitation, and non-disclosure agreements and trade secrets misappropriation.

Photo courtesy of David Castillo Dominici and freedigitalphotos.net.