h3>Avoiding Trade Secret Misappropriation in
Employee/Employer Relationships
Hiring and firing employees is a delicate business with regard to
trade secrets. Work performed that develops into trade secret material
and that was created within the scope of one's employment ultimately
belongs to the employer. Thus, the employee cannot use the trade secret
he or she created for the employer after the employment relationship has
terminated, provided the employer has taken adequate steps to protect
the trade secret material.
Some employers learn painful lessons through costly litigation that
could have been avoided if the employer had implemented a trade secret
protection program. This program should establish a confidential
relationship with employees and establish evidence of security measures
with respect to trade secret material. The program and the trade secret
material should be updated and audited annually.
An essential part of a trade secret protection program is employee
confidentiality agreements that notify the employee of what information
is considered a trade secret and provide evidence that the employer is
taking proper steps to maintain secrecy. The confidentiality agreement
also provides the employer a breach of contract claim, in addition to a
trade secret misappropriation claim, if a lawsuit ensues.
Confidentiality agreements also may include other important
provisions, such as noncompete clauses or obligations to assign patents.
However, it is important to check the specific state law regarding
noncompete clauses, since many have statutes that limit the scope of
such covenants. Under section
103.465 of the Wisconsin Statutes, a covenant is enforceable only if
it is necessary for the employer's protection, does not contain
overburdensome time and geographic restrictions, and is reasonable to
the employee.
In the absence of a written confidentiality agreement, there still is
an implied duty not to disclose confidential or trade secret information
in an employer/employee relationship. However, the presence of a
confidentiality agreement substantially strengthens an employer's case
should a lawsuit arise.
When hiring new employees, it is important to have them sign both a
confidentiality agreement, and an agreement stating that they are not
bringing any trade secret or confidential information with them to the
new employer. This will help shield the new employer from any lawsuits
for trade secret misappropriation filed by the former employer.
Wisconsin Lawyer
