Precise Agreements, Careful Definitions Protect Trade Secrets

(Originally published in The Business Journal)

 In Ohio, as in most other states, employers are able to prevent a competitor or an ex-employee from taking information which fits within the definition of a trade secret. 

A trade secret is defined broadly under Ohio law and includes not only technical information, designs and programs, but also business plans, financial information and customer lists.

To qualify as a trade secret, however, the information must have independent economic value because it is not readily available by proper means. Additionally, the information must be the subject of reasonable efforts to maintain its secrecy.

By making those efforts to maintain secrecy, an employer is able to put itself in a position to prevail in litigation against a competitor or ex-employee who misappropriates the information.

Ohio law prohibits the misappropriation of trade secrets and permits the recovery of monetary damages from the wrongdoer and, in some cases, his new employer. Triple damages and attorney fees are recoverable if the wrongdoers’ acts were willful or malicious. Additionally, injunctive relief is also available to prevent use of the misappropriated information.

The challenge to employers in this area has grown with the widespread use of personal computers and similar technology.  Information that was once kept in locked files in locked plants and offices is now stored electronically on your employee’s Blackberry.

The sheer volume of information that can be transferred in minutes to a flash drive exposes employers to damages not contemplated in the past.

Employers who disclose trade secrets to their employees need a written agreement with the employee, prior to disclosure, to clarify several things.

• The first is an acknowledgment that the information really is a trade secret.
• The second is a promise not to disclose the trade secret to another, both during and after employment.
• The third is a promise to return all trade secrets at the termination of employment.  This should include all copies of the material.

Additionally, sensitive information should be marked or stamped accordingly, and internal and external access to the information should be recorded and controlled.

By making reasonable efforts to preserve the secrecy of sensitive information, the employer is giving itself a fighting chance at keeping a competitor or ex-employee from using the information.

General industry knowledge and information readily available from the customer do not qualify as trade secrets, however.  Neither does information able to be gleaned from an examination of your product (through reverse engineering, for example).

An employee is free to take another job and utilize what he has learned during his tenure with your company, unless he has signed a non-compete agreement. What he can’t do, however, is use or disclose your trade secrets to his new employer.

The ultimate legal issue in cases of this type often turns upon the ability of the employer to qualify his information as a trade secret.

Prudent employers should think through this ahead of time in order to maximize their chances to prevail on the issue in the future.

Hawley can be reached at whawley@hhmlaw.com or at (330) 392-1541