“Make No Bones” About Protecting Confidential Business Information
by
Ryan P. Avery on May. 27, 2014
Business Corporate Employment Employment Contracts Industry Specialties Science, Technology & Internet
Summary: Companies in Massachusetts must take proactive steps to prevent the improper use of confidential business information by their employees and associates, or risk losing protection of that information under the law.
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But not so fast.
Assuming that the company can prove the former employee’s possession and
use of the information for which it seeks protection, it must also prove that
the information is in fact a bona fide “trade
secret.” Furthermore, companies
cannot simply expect employees and contractors to presume the confidentiality
of trade secrets in the absence of a
clear policy or agreement.
Trade
secrets are based on information not known to others which, if disclosed to a
competitor, would provide the competitor with some sort of competitive
advantage. In “misappropriation”
cases, trade secrets should be described with specificity: demonstrating that a former consultant
“received a detailed corporate profit margin analysis on August 1, 2013” is far
better than a vague reference to the consultant’s “exposure to multiple
e-mails containing confidential sales information. The intention to restrict use or disclosure of trade
secrets must be communicated to employees in clear terms, desirably in writing within employee
contracts and handbooks. Language
attached to corporate e-mails and electronic password fields may also
suffice. The protection of trade
secrets will not be assumed or implied through vague language or
behavior. For example, in a recent Massachusetts
case (C.R.T.R., Inc. v. Lao), a corporation’s claim for
misappropriation was thrown out despite deposition testimony from two
corporate employees, one who was told “not to take work out of the office,”
and another who stated that she “just knew” that employer customer lists were
confidential. The result in this case
was that the defendant - an independent contractor who had managed the
plaintiff’s business for a number of months – was free to utilize the
plaintiff’s records concerning pricing, billing, sales, supply costs and
marketing, with which he had allegedly absconded. In short, employers should “make no bones” about notifying employees as to the existence and allowable use of any confidential information with which the employees may come across. Informal discussions or “mutual understandings” on this subject are likely to create more headaches than they prevent. |