Make sure employees acknowledge their obligations under the employer’s trade secret protection program

February 15, 2013

Westlaw JournalsLast month I discussed the importance to employers of making sure that their agreements with employees regarding confidentiality of trade secrets and assignments of inventions are always supported by adequate consideration from the employer.  This month I wanted to talk about another tip for strengthening the enforceability of employee intellectual property agreements: making sure that employees specifically acknowledge that information covered by those agreements is indeed confidential to the employer and that they intend to comply with the terms of the employer’s trade secret protection program.

Use of an acknowledgement of confidentiality in an agreement serves several purposes in increasing the likelihood of enforceability.  First, trade secret cases are usually equity cases, with broad discretion granted to the trial judge.  In a close case, acknowledgement of confidentiality may affect the exercise of this discretion.  When articulated in terms of estoppel or merely general unfairness, the acknowledgement of confidentiality is likely to have some impact on an employee-defendant’s ability to deny that the information sought to be protected is protectable.  Second, since contractual protection of confidential or proprietary information is not strictly limited to information that qualifies as a trade secret and is also available for information in which the employer has a “protectable interest”, an acknowledgement that such information is protectable may influence the determination of the degree of latitude to be accorded to contractual protection of information that does not qualify as a trade secret.

As for an employee acknowledgement of intent to comply with a trade secret protection program, it can be done as a stand-alone document or incorporated into an employment agreement.  The key is to be sure that the employee clearly understands his or her obligations to take certain actions incorporated into the employer’s overall trade secrets program including attending educational programs conducted by the employer about maintenance of the employer’s trade secrets, abiding by any signs or other physical security measures designating certain areas as accessible to only those with trade secret clearance, maintaining sign-in logs and confidential notebooks as required by the employer, refraining from disclosing trade secrets to outside parties with prior authorization from a designated employer official and refraining from bringing non-employees into the offices or plants of the employer without prior permission.  The form should also be used as an opportunity to confirm that the employee will participate in any exit interview upon termination of his or her employment.