At any business, a certain amount of turnover is a fact of life. Good employees will leave the company, either to start their own venture or to take a better opportunity elsewhere. When this happens, it is crucial for the business to take steps to protect its trade secrets.
An example of the importance of protecting trade secrets can be found in a recent lawsuit involving California-based social game developer Zynga. It is suing one of its former general managers, claiming that he misappropriated sensitive information when he left the company to join rival Facebook game developer Kixeye.
The GM was responsible for overseeing Zynga’s CityVille game. He left the company in August 2012 to serve as the VP of Product at Kixeye. Kixeye is a smaller company that has staked much of its success on recruiting talent away from Zynga and other more established game developers.
Zynga alleges that the GM made copies of approximately 760 documents before leaving the company, including revenue projections, planning documents for several unreleased games, strategic plans and confidential email communications.
Zynga sued its former GM, claiming that he violated the company’s trade secrets. It also secured a temporary restraining order barring him from using or disclosing any of the data, making copies of the information and engaging in any game development that might implicate Zynga’s trade secrets.
In its defense, Kixeye claims that the lawsuit is unwarranted and that Zynga has made a habit of suing departing employees in an attempt to intimidate its current workers into staying with the company.
Protecting trade secrets
The first step to protecting your company’s trade secrets is understanding exactly what trade secrets are. Basically, a trade secret is anything that is unique to the business but is not part of the general public knowledge. Further, trade secrets are things that would generally not be available to competitors unless they engaged in nefarious tactics to obtain them. It is not necessary for trade secrets to be protected by trademarks or copyrights.
Although it may seem obvious, trade secrets are only protected if they are actually kept secret. Giving the information to a potential customer, trade organization or anyone else outside the company may destroy trade secret protection unless the recipient signs a confidentiality agreement.
Access to trade secrets should be restricted on a “need to know” basis. All documents should be clearly marked as confidential. Physical copies should be kept in a safe or locked filing cabinet and electronic files should be password-protected.
Finally, any employee who might have access to trade secret information should be required to sign a confidentiality agreement. It is usually a good idea to execute this agreement and provide appropriate training whenever a new employee starts.
If your company depends on trade secrets, it is a good idea to consult with an experienced business law attorney who can help you draft the appropriate confidentiality agreements and disclosures. If your trade secrets have been misappropriated by a competitor or former employee, the attorney can help you take action and minimize any collateral damage.