Employee Confidentiality Agreements: Hidden Deadly Weapons in Trade Secret Battles

As the first two months of the year come to an end and New Year’s resolutions fade away, it’s time to revisit what can be done to better protect your company’s sensitive and proprietary information in 2017. 

One way to protect your company assets is by making sure you have updated confidentiality agreements in place for employees who have access to sensitive information. A good confidentiality agreement will govern any likely scenario that could arise, working not only to shield a disclosure from ever happening but acting as a sword if a disclosure does occur.

Looking at your company’s form agreements on an annual basis is always a good idea to ensure they are capable of protecting your business in an ever changing economy. This year, there is another reason to take a look at your confidentiality agreements: The Defend Trade Secrets Act of 2016. The Act creates a federal civil cause of action for trade secret misappropriation for any injured party.

The Act also provides some extraordinary remedies for theft of a trade secret including attorney’s fees and punitive damages. However, those damages are only open to a company who has placed whistleblower immunity language into their agreements or policies that govern confidential information. This requirement of disclosing whistleblower immunity is required in any contract that is entered into or updated after May 11, 2016. The Act, however, also introduces uncertainty over how previous agreements or even employee policies would be interpreted and applied.

Another important factor is to make sure your dispute resolution process in the agreement is one that will be efficient and cost-effective when the time comes to act to defend your company.

Finally, be aware that many companies include non-competition, non-solicitation, no-hire, non-disparagement, and ownership-of-inventions (IP ownership) clauses in their employee confidentiality agreements to further protect the company’s interests. These have to be carefully drafted and updated regularly in light of new court cases to be enforceable and effective, so don’t use standard “boilerplate” language. It’s all part of making sure 2017 gets off to a great start for your company.

Article brought to you by:

Fourd H. Kemper Jr.
Of Counsel, Chair of the Emerging Growth Practice Group
Woods Rogers PLC

Elizabeth Burgin Waller
Principal
Woods Rogers PLC