The recipe to make Coca Cola is one of the oldest trade secrets. But what is a trade secret and how do you protect it?
The Defend Trade Secret Act (DTSA) was signed into federal law in 2016. Since being enacted, the parameters detailing how to interpret the DTSA has worked its way through the federal court system, as is typical for any new federal law. However, with the proliferation of remote work starting in 2020 due to the Covid-19 pandemic, maintaining trade secrets by remote workers has become a challenging task. The safeguards required for on-site employees must be revised to account for employees accessing trade secrets remotely.
The DTSA defines a trade secret as:
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
The DTSA requires an owner to take “reasonable measures” to keep trade secret information secret, but the term “reasonable measures” is not defined in the DTSA. Courts have held that “reasonable measures” include implementing written confidentiality policies, execution of nondisclosure agreements, limiting access to the trade secrets to personnel on a “need to know” basis using multi-layer credentialed access, and placing restrictions on the unauthorized transfer and use of company owned data.
Before addressing how such reasonable measures can be extended to employees working remotely, the following should be considered:
- Is the employee at a home office or in a public setting?
- Do other persons have access to the employee while viewing the trade secret?
- Is the trade secret being accessed on an open Internet connection?
- How long is the trade secret available for viewing once opened?
- Is the trade secret downloaded or stored on the remote employee’s local computer indefinitely?
- Is the trade secret itself password protected and not only credentialed access for downloading the trade secret?
- Should certain trade secrets only be accessible on-site at the employer’s facilities?
Failure to take reasonable measures to protect a company’s trade secrets could result in the trade secret losing its protected status. If that occurs and the trade secret is made public and accessible to competitors without recourse, the company may lose its competitive advantage.
An employer should have a robust employee manual that details how trade secrets are treated, who should have access to the trade secret depending on their status/role within the company, and other industry-specific factors to ensure the trade secret remains secret.
Another aspect of the DTSA is a safe harbor provision for employees (whistleblowers) who disclose a trade secret solely for the purpose of reporting or investigating a suspected violation of law or in a lawsuit made under seal. Employers are advised to pay close attention to the notice provision within the whistleblower section of the DTSA since compliance with the DTSA whistleblower notice provision could affect the ability of the employer to seek certain remedies. To be clear, employers must notify employees of the existence of whistleblower immunity under the DTSA in order to seek punitive damages and attorney’s fees against a former employee for trade secret misappropriation.
Notice of whistleblower immunity under the DTSA should be included in employee manuals, policies, confidentiality and other employment-related agreements. Employers should look at the language in these materials to ensure protection of trade secrets in the new remote work world, which certainly appears to be here to stay. If proper safeguards are not in place, the employer may lose trade secret protections and leave their trade secrets unprotected.
For any questions about the DTSA and complying with its requirements to protect your important trade secrets, contact Greg Popowitz, Board Certified Intellectual Property Attorney, and Ellen Leibovitch, Board Certified Labor and Employment Attorney.
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