A question which frequently comes up in today’s business climate is what should I do as an owner of the business to protect my business’s confidential and proprietary information.
1. Implement a program in the business that requires every employee to not only execute a terms sheet for the terms of his/ her employment , but also as part of that agreement there should be included in the same a number of paragraphs that define and then discuss what needs to be done by each and every employee of the company as relates to company confidential and proprietary information.
2. Once a plan has begun, then as part of the plan it is a good idea to continually update what items of software, hardware, customer lists and the like are actual component parts of the business and which are items or collections of data that are not simply readily available in the public forum.
3. You then need to create , or have your business attorney create a template agreement into which each employees specialized and crafted terms of employment will be detailed and which agreement will also include a definition and agreement about how the employee will handle and deal with confidential information of the company.
4. An example of some of the typical language one might find in a confidentiality/ proprietary information agreement is as follows:
1. Definitions. As used in this Agreement, the following terms have the following definitions:
a. “Clients” means any person or entity for whom Company performs services, to whom Company sells products, or from whom Company, Employee, or both obtain information.
b. “Confidential Information” means proprietary techniques and confidential information that Company has or will develop, compile, or own, or that Company receives under conditions of confidentiality. Confidential Information includes not only information disclosed by Company (including its Employees, agents, and independent contractors) or its Clients to Employee in the course of employment, but also information (including Inventions) developed or learned by Employee during the course of employment with Company. Confidential Information is to be broadly defined and includes (i) all information that has or could have commercial value or other utility in the business in which Company or Clients are engaged or in which they contemplate engaging and (ii) all information that, if disclosed without authorization, could be detrimental to the interest of Company or Clients, whether or not such information is identified as Confidential Information by Company or Clients. By example and without limitation, Confidential Information includes all information on teaching techniques, processes, formulas, trade secrets, inventions, discoveries, improvements, research or development test results, specifications, data, know-how, formats, marketing plans, business plans, strategies, forecasts, unpublished financial information, budgets, projections, and customer and supplier identities, characteristics, and lastly and certainly not least, all customer lists (past, present or in the process of being enlisted) and or customer data including but not limited to contact information and personal information particular to that customer’s service needs.
c. “Inventions” means discoveries, developments, designs, ideas, improvements, inventions, formulas, processes, techniques, know-how, and data (whether or not patentable or registerable under copyright or similar statutes) made, conceived, reduced to practice, or learned by Employee (either alone or jointly with others) during the period of employment, that (i) are related to or useful in the business of Company, (ii) result from any work performed by Employee for Company, or (iii) result from the use of premises owned, leased, or otherwise used or acquired by Company.
2. Protection of Company’s Confidential Information.
a. At all times during and after Employee’s employment, Employee will hold in trust, keep confidential, not make use of, and not disclose or reveal to any third party any Confidential Information, except in the course of Employee’s employment with Company and for the benefit of Company. Employee will not cause the transmission, removal, or transport of Confidential Information or Inventions from Company’s principal place of business or such other place of business specified by Company, without prior written approval of _____________.
b. Employee acknowledges that the unauthorized use or disclosure of Confidential Information may be highly prejudicial to the interests of Company or its Clients, an invasion of privacy, or an improper disclosure of trade secrets.
Company policy requires prior approval for publications or presentations
c. If Employee desires to publish the results of Employee’s work for Company through literature or speeches, Employee must submit such literature or speeches to ____________, President, at least 30 days before dissemination of such information. Employee will not publish, disclose, or otherwise disseminate such information without the prior written approval of, President. Whenever the approval, designation, specification, or other act of President, is required under this Agreement, the President, may, by written designation, authorize an agent of Company to perform such act.
Noncompetition during employment
a. Except with the express prior written consent of the, President, Employee will not, during the period of employment with Company, (i) engage in any employment or activity other than for Company in any business in which Company is engaged or contemplates engaging, (ii) induce any other Employee of or Employee of Company to engage in any such employment or activity, or (iii) solicit any Clients or potential Clients of Company for services similar to those performed by Company, even if not directly competitive with such services.
Noncompetition after termination of employment
b. For a period of 24 months immediately after termination of Employee’s employment with Company, Employee will not interfere with Company’s business by soliciting an Employee to leave Company’s employ, by inducing a Employee to sever the Employee’s relationship with Company, or by soliciting business from any of Company’s customers or clients. Employee acknowledges that the customer list and representative list for any of Company=s products are a trade secret. As such, no use of such lists are permitted subsequent to Employee=s departure from employment with the Company.
Prior knowledge and relationships
The aforementioned provisions are by no means exhaustive but simply give the reader the flavor of the type of provisions that find there way into agreements to protect the confidentiality and proprietary nature of the company’s key note and core information.
Often times, there is a good deal of confusion over the difference between non compete agreements preventing an employee from simply competing when they leave the employ of a given company in the same basic field of endeavor. Generally, in California you cannot prevent an employee from competing with your business when they leave unless they were a part owner of the business and as part of the buyout agreement they entered into a covenant not to compete.
However, competing with the business solely vs competing with the business based upon the conversion (theft) of the confidential and proprietary information of a company is a totally different matter which is able to be prevented , based upon meeting the burden of proof on the issues in Court, by way of a request for injunctive relief.
If the information being used is simply information readily available in the public domain then the likelihood is that such information would not qualify as confidential and proprietary information and competition based upon the same would not be prevented.
There sometimes can be a very fine line which distinguishes between what is protected and what is not protected. Such a factor is why, when drafting your agreements that you have your employees sign, you want and need as much specificity as possible describing the confidential and proprietary information however one really wants to use the language to the effect ‘includes but is not limited to the following information’ …
Suffice to say that there are books that are written on this subject area and this article for the blog is a very small piece of the puzzle, but nonetheless the article should give you the flavor of what you need to watch for and be careful to protect against.
Steven H. Wilhelm