How-to guide: How to protect trade secrets in the employment relationship (USA)

Introduction

This guide will assist in-house counsel, private practice lawyers, and human resource departments with protecting trade secrets in the employment relationship. This guide seeks to provide an overview of the relevant federal and state law relating to trade secrets and help practitioners in establishing tools to prevent potential trade secret misappropriation.

This guide covers:

1. Overview of the legal framework relating to the protection of trade secrets in the employment relationship
2. Prevention: legal and administrative measures
3. Prevention: technological tools

This guide can be read in conjunction with How-to guides: Overview of US employment law and How to draft an employment contract and Checklist: Drafting a non-compete agreement.

Step 1 – Overview of the legal framework relating to the protection of trade secrets in the employment relationship

Protecting trade secrets is an important issue for employers and organizations that engage the services of other workers such as independent contractors. Employees and contractors often need access to important, confidential business information, amounting to trade secrets, in order to carry out their roles. This gives rise to a risk that the employee or contractor will use the confidential information for other purposes which can potentially be damaging to the organization. This risk is particularly high when an employment relationship comes to an end, as the former employee or contractor may seek to use the confidential information in their new employment or for their own business venture. However, there is also a risk of trade secrets being misappropriated during employment or during the engagement of a contractor and organizations should be vigilant in their measures to protect trade secrets both during an employment relationship and on termination.

Trade secrets law in the United States has historically been a matter of state law; however, in 2016 the federal Defend Trade Secrets Act 2016 (DTSA) was enacted, creating an additional potential cause of action at federal level.

1.1 Federal law

1.1.1 Defend Trade Secrets Act (DTSA)

The DTSA created a federal, private, civil cause of action for trade-secret violations, provided that the trade secret relates to a product or service used in, or intended for use in, interstate or foreign commerce.

The DTSA gives US companies protection against misappropriation of important propriety information, enabling them to seek remedies in federal court. The DTSA offers some significant provisions not included in the Uniform Trade Secrets Act with 1985 Amendments (UTSA) (considered below at section 1.2), including the following:

• new procedural options;
• enhanced remedies; and
• an explicit application to extraterritorial conduct outside the United States.

Definitions of trade secret and misappropriation

An important element of the DTSA is that it provides uniform definitions for the critical terms ‘trade secret’ and ‘misappropriation.’ Significantly, the DTSA’s definition of trade secret is broad, allowing a wide range of proprietary information to fall within the scope of trade secret protection under the statute.

The definition of ‘Trade Secret’ under the DTSA is:

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 (see, 18 USC section 1839(3)).

‘Misappropriation’ is defined in the DTSA as:

1. acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
2. disclosure or use of a trade secret of another without express or implied consent by a person who—
   1. used improper means to acquire knowledge of the trade secret;
   2. at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was—
      1. derived from or through a person who had used improper means to acquire the trade secret;
      2. acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or
      3. derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or
   3. before a material change of the position of the person, knew or had reason to know that—
   4. the trade secret was a trade secret; and
   5. knowledge of the trade secret had been acquired by accident or mistake (see, 18 USC section 1839(5)).

Interstate commerce requirement

The DTSA requires that a trade secret be ‘related to a product or service used in, or intended for use in, interstate or foreign commerce’ in order to constitute an actionable claim under the DTSA (see, 18 USC section 1836). Courts have made it clear that plaintiffs cannot ignore the interstate commerce requirement. Plaintiffs should allege in the complaint specific facts that illustrate a nexus between the trade secret that was misappropriated and interstate or foreign commerce. Otherwise, the DTSA claims will risk being dismissed for ‘fail[ing] to allege any nexus between interstate or foreign commerce and the alleged trade secrets.’ See, for example, Gov’t Emps Ins Co v Nealy, 262 F Supp 3d 153, 173 (ED Pa 2017).

Reasonable efforts required by owner to protect trade secrets

The DTSA requires that trade secret owners must take sufficient measures to maintain the protection of trade secrets, as noted in the definition of Trade Secret at 18 USC section 1839(3) (detailed above).

A common argument by defendants is that protection of the information alleged to be a trade secret lapsed because owners did not take ‘reasonable measures to keep their information secret.’ Whether measures taken by trade secret owners are reasonable will depend on the facts and circumstances of each case. For example, in one case the court held that reasonable measures were taken when information was protected by limiting access to a source code by logging-in, encrypting the source code, and requiring employees to sign a proprietary information and inventions assignment agreement (see, WeRide Corp. v Kun Huang, 379 F. Supp. 3d 834 (N.D. Cal. 2019)).

Another court held that giving access to the information without requiring the other parties to sign a confidentiality agreement did not amount to reasonable protective measures (see Temurian v Piccolo, Case No 18-cv-62737-BLOOM/Valle (SD Fla Jun 13, 2019)).

On November 18, 2025, the US Court of Appeals for the Fourth Circuit in Samuel Sherbrooke Corporate Ltd. v Mayer (No. 24-2173) offered important clarity on the ‘reasonable efforts’ standard for trade secret protection under the DTSA, particularly at the early pleading stage. The Fourth Circuit reversed the district court's decision, finding that the plaintiff, Sherbrooke, was not required to prove reasonable efforts at the pleading stage. Instead, the court held that it was sufficient to plausibly allege that the proprietary software was protected by an employment agreement containing a confidentiality provision. The court concluded that such an agreement, as a matter of law, constitutes a reasonable measure to maintain secrecy for the purpose of surviving a motion to dismiss. This ruling reinforces the idea that what constitutes ‘reasonable efforts’ is a highly fact-intensive inquiry, context-dependent, and generally ill-suited for resolution on a motion to dismiss. While this sets a low bar for surviving early litigation, the court's opinion implicitly cautions companies that this minimum standard for pleading is not the standard required to win at trial.

This case illustrates that companies should avoid relying on minimal or inconsistent security measures. Do not assume a single confidentiality agreement is enough to win at trial, as it may be viewed as inadequate by a jury when weighed against the value of the secret. Do not use ‘hit-or-miss’ methods, such as requiring only some key employees to sign NDAs or inconsistently placing confidentiality markings on materials.

Remedies available under the DTSA

Civil seizure mechanism

The DTSA includes a civil seizure mechanism. This mechanism provides a preventative tool that can be ordered by the court prior to a formal finding of misappropriation of a trade secret. A court may, following an appropriate application by a trade secret owner, issue an order ‘providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action’ (see, 18 USC section 1836). Following issuance of a seizure order, the court is required to hold a hearing. At that hearing, the party who obtained the seizure order has the burden to prove the facts justifying the order. Civil seizure is allowed only in extraordinary circumstances. The party who requests the seizure must demonstrate that, among other things, an immediate and irreparable injury will occur if seizure is not ordered.

Other remedies under the DTSA

Listed below are additional remedies available upon a court finding of misappropriation of a trade secret.

• Injunctions – a court may grant an injunction to prevent any actual or threatened misappropriation of a trade secret. Where appropriate, an injunction may require the person who appropriated the secret to take some affirmative actions to protect the trade secret, such as putting documents or tangible objects in secure custody, such as in the custody of a party’s attorney. An injunction may also condition future use of the trade secret on the payment of reasonable royalties, which typically means the amount which the court estimates a person desiring to use the trade secret would be willing to pay for its use.
• Damages – an additional remedy after a finding of misappropriation is an award of damages. If the trade secret was ‘willfully and maliciously misappropriated’, a court may award exemplary damages that are double the amount of the compensatory damages already awarded. Further, a court may also award attorney fees where the misappropriation or claim of misappropriation was in bad faith, or where a motion to terminate the injunction is made or opposed in bad faith (see, 18 USC section 1836).

Court decisions and awards under the DTSA

The DTSA allows for an award of damages for actual loss caused by the misappropriation of the trade secret and damages for any unjust enrichment caused by the misappropriation that is not addressed in computing damages for actual loss (see, 18 USC section 1836). Since the enactment of the DTSA a primary concern that has been expressed by numerous courts is the difficulty in connecting the amount of damages requested or awarded to the trade secrets that have been misappropriated.

For example, in one decision under the DTSA the Federal Circuit reversed the District Court’s determination of the damages award. This was due to the plaintiff’s expert failure to apportion damages by trade secret in a case involving misappropriation of three trade secrets, one of which stopped being a secret at a different time from the others. Instead, the expert attributed ‘all profits to the misappropriation of all trade secrets.’ As a result of this failure, the Federal Circuit held that there was an insufficient link between the misappropriated trade secrets and the damages award (see, Texas Advanced Optoelectronic Solutions, Inc v Renesas Electronics America, Inc, 895 F.3d 1304 (Fed. Cir. 2018)). Similarly, the Fourth Circuit affirmed an award of summary judgment against a plaintiff for lack of support for a finding that the unauthorized transfer of data was the cause of the plaintiff’s lost revenue (see, 360 Mortgage Group LLC v Home Point Financial Corporation, 740 Fed. App’x 263 (4th Cir 2018)).

In one noteworthy case, it has been speculated that the plaintiff settled for significantly less than the amount of damages originally sought, due to the difficulty in calculating damages based on the actual trade secrets misappropriated, especially given that there was at least some evidence that the trade secrets may never have actually been used at all (see, Waymo LLC v Uber Techs, Inc, No C 17-00939 WHA (N.D. Cal. Nov. 2, 2017)).

Identification of trade secrets

Proper identification of the trade secrets is an important aspect of any litigation surrounding misappropriation. Recent guidance from the Sedona Conference provides four principles to use in the proper identification of asserted trade secrets in misappropriation cases.

• Principle No 1 – the identification of an asserted trade secret during a lawsuit is not an adjudication of the merits and is not a substitute for discovery.
• Principle No 2 – the party claiming misappropriation of a trade secret should identify in writing the asserted trade secret at an early stage of the case.
• Principle No 3 – the party claiming the existence of a trade secret must identify the asserted trade secret at a level of particularity that is reasonable under the circumstances.
• Principle No 4 – the identification of an asserted trade secret may be amended as the case proceeds.

The guidance also provides ‘Guidelines at a Glance’ among other helpful information. See ‘The Sedona Conference Commentary on the Proper Identification of Asserted Trade Secrets in Misappropriation Cases,’ 22 SEDONA CONF J 223 (2021).

Customer lists

Courts will generally rely on precedent from their circuit in determining whether a customer list qualifies as a trade secret. Not surprisingly, the outcomes and interpretations have not been consistent. For example, in the Ninth Circuit courts have previously granted trade secret protection to customer lists because the list ‘allows a competitor . . . to direct its sales efforts to reach those potential customers that are already doing business with [the trade secret holder]’ (see, Chartwell Staffing Servs Inc v Atl Sols Grp Inc, No 819CV00642JLSJDE, 2019 WL 2177262, at *5–8 (CD Cal May 20, 2019) (internal quotations omitted)). However, other courts have found that ‘[c]ustomer lists, pricing information, long-term sales strategies, and customer buying habits do not necessarily constitute trade secrets’ (see CH Bus Sales, Inc v Geiger, No 18-CV-2444 (SRN/KMM), 2019 WL 1282110, at *9 (D. Minn. Mar 20, 2019)).

Economic Espionage Act

The Economic Espionage Act 1996 (EEA), codified in 18 USC section 1831-1839, makes the theft or trafficking of trade secrets for foreign governments, instrumentalities, or agents a criminal act. The EEA codifies two offenses as explained in more detail below.

Theft benefiting a foreign government

The first offense covered by the EEA (see 18 USC section 1831) is ‘economic espionage,’ which arises when the theft in question benefits a foreign government, instrumentality, or agent. Economic espionage prosecutions require express approval from the attorney general, the deputy attorney general, or the assistant attorney general of the criminal division. An individual convicted of economic espionage may be sentenced to a maximum of 15 years in prison, a fine of up to $5,000,000, or both. An organization found guilty may be punished by a fine of up to $10,000,000 or three times the value of the stolen trade secret, whichever is greater.

Theft of commercial trade secrets

The commercial theft of trade secrets carried out for economic advantage whether or not it benefits a foreign government, instrumentality, or agent is unlawful (see, 18 USC section 1832). This offense applies to both foreign and domestic trade secret disputes and carries a 10-year maximum term of imprisonment. This provision contains three additional limitations not found in section 1831:

• a defendant charged under section 1832 must intend to convert a trade secret ‘to the economic benefit of anyone other than the owner thereof,’ including the defendant;
• the defendant must intend or know that the offense will injure an owner of the trade secret; and
• the trade secret must be ‘related to or included in a product that is produced for or placed in interstate or foreign commerce.’

For both section 1831 and 1832 claims, a plaintiff must prove that the information in question was a trade secret. In order to do so, a plaintiff must prove that the information was not ‘generally known to,’ or ‘readily ascertainable through proper means’ by the public, that reasonable measures under the circumstances were taken to keep the information confidential, and that the information holds independent economic value (see, 18 USC section 1839(3)).

On May 5, 2025, the House of Representatives passed H.R. 1486, a bill that would require the President to impose sanctions on foreign adversary entities that knowingly engage in economic or industrial espionage (including trade-secrets theft). If enacted, the new law would bolster the government’s ability to respond to the theft of trade secrets by foreign entities.

1.2 State law

Prior to enactment of the DTSA, trade secrets were primarily a state law issue. As a result, many of the federal courts look to state case law and established legal precedents in applying the DTSA.

The Uniform Trade Secrets Act (UTSA), adopted in 1979 and amended in 1985, recognized the need for uniformity in state trade secret law. The UTSA was designed to:

• eliminate uncertainty surrounding trade secret misappropriation;
• provide uniform definitions of trade secret and misappropriation; and
• provide codified remedies for misappropriation of a trade secret.

The UTSA embraced a broader definition of ‘trade secret’ than the guidance utilized at the time (see section 757, Restatement of Torts) and extended protection to certain plaintiffs whose trade secrets had been misappropriated.

The UTSA provides for injunctive relief against actual or threatened misappropriation. In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty. ‘Exceptional circumstances’ include a material and prejudicial change of position prior to knowing or having reason to know of a misappropriation that renders a prohibitive injunction inequitable.

A plaintiff under the UTSA may also recover damages for misappropriation. Damages awarded may include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing the actual loss. In lieu of damages measured by other methods, the damages caused by misappropriation may be measured by a reasonable royalty for the misappropriator’s unauthorized disclosure or use of a trade secret. If the misappropriation was willful and malicious misappropriation, the court may award exemplary damages in an amount not exceeding two times any other damage award.

The UTSA has been adopted by all states except New York and North Carolina (although the North Carolina law is very similar and appears to borrow heavily from the UTSA). The UTSA has also been adopted in the District of Columbia, Puerto Rico, and the US Virgin Islands. States are not required to pass the UTSA exactly as is, and some have made amendments. Because of this, variations and state-specific nuances regarding trade secret law remain important when considering trade secret issues under the DTSA.

Step 2 – Prevention: legal and administrative measures

While legal remedies may be available, preventing potential causes of action by taking appropriate legal measures in advance is always preferable.

2.1 Legal measures

There are a number of legal, preventative measures organizations can take in order to protect trade secrets in the context of a relationship with an employee or an independent contractor. These include entering into one or more agreements with the individual, including a non-disclosure agreement, non-compete agreement, or non-solicitation agreement. Such agreements might be included in an employment contract or entered into as separate, standalone agreements.

Employers seeking to protect trade secrets should also ensure that employment contracts include appropriate provisions relating to confidentiality, data security, and external employment. Employee handbooks might also include relevant provisions. Employers should be mindful that whilst employment contracts will usually have contractual effect, employee handbooks are often non-contractual and therefore cannot be enforced through legal measures.

For further information see How-to guides: How to draft an employment contract and How to draft the key provisions of an employee handbook.

2.1.1 Non-disclosure and confidentiality agreements

As noted in section 1.1 above, the owner of a trade secret must take reasonable measures to keep the information secret in order to claim protection under the federal DTSA or any state trade secrets legislation. An organization must therefore balance the need to share the information with employees, business partners, or other parties with whom it does, or would like to do, business (eg, a franchisee, a joint venture partner, a potential buyer, etc.) against the requirement to protect trade secrets. One way to do this is to enter into a non-disclosure agreement (NDA) with the employees or other parties receiving the information.

Time-limited non-disclosure agreements

One concern for an organization seeking to protect a trade secret is where an NDA contains a time limit on its non-disclosure obligation. In those cases, the expiration of that time limit may jeopardize the trade secrets covered by the NDA. In some cases, courts have concluded that the expiration of the non-disclosure obligation may demonstrate that the trade secret owner is no longer taking reasonable measures to preserve the secrecy of the information see, for example, Marketel Intern, Inc v Priceline.com, Inc, 36 Fed Appx 423, 425 (Fed Cir 2002). In this case, when the NDA expired, no implied duty of confidentiality existed; therefore, the owner was deemed not to be taking any measures to protect the trade secrets and therefore did not qualify for protection under the DTSA.

On the other hand, some courts have held that the expiration of an NDA does not conclusively bar a claim for an alleged trade secret misappropriation that occurred after the date of expiration of the NDA. Rather, the expiration of the NDA is simply one factor the jury may consider in evaluating whether or not the owner adequately protected its trade secrets at the time of the alleged misappropriation. See, eg, Alta Devices, Inc v LG Electronics, Inc, No 18-CV-00404-LHK, 2018 WL 5045429, at *7 (ND Cal Oct 17, 2018), where it was stated that ‘an expired contract does not automatically render any information incapable of receiving trade secretion protection’; and BladeRoom Grp Ltd v Facebook, Inc, No 5:15-cv-01370-EJD, 2018 WL 1569703, (ND Cal Mar 30, 2018) in which the court rejected the defendant’s argument that because the parties’ NDA had expired, ‘the information was no longer ‘secret’ [and] [defendant] was under no obligation to treat it as confidential.’

In another case, the court analyzed the enforceability of an NDA under the standards established for non-compete contracts, and ultimately held that the NDA was unenforceable (see, TLS Mgmt v Rodriguez-Toledo, 966 F.3d 46 (1st Cir. 2020)). Agreements not to disclose and utilize confidential business information ‘are related to general covenants not to compete because of the similar employer interest in maintaining competitive advantage,’ and overly broad nondisclosure agreements, ‘while not specifically prohibiting an employee from entering into competition with the former employer, raise the same policy concerns about restraining competition as noncompete clauses where, as here, they have the effect of preventing the defendant from competing with the plaintiff.’

Drafting a non-disclosure agreement

The purpose of NDAs is to ensure that an employee or former employee has an obligation to keep certain information confidential. While each such agreement should be tailored to meet the needs and circumstances of the parties involved, there are several key provisions to include as listed below.

• Definition of confidential information – what information is being protected by the agreement? This may be defined by the use of general categories (eg, processes, formulas, and algorithms) rather than by listing specific facts.
• The parties – who is being bound by this agreement?
• The duration – how long will the obligation not to disclose last? There is no set formula for determining the duration of an NDA. Some may last indefinitely: a soft-drink manufacturer would likely want to keep its drink recipe secret forever. On the other hand, some secrets may have a shorter life; for example, a planned advertising campaign stops being a secret when the campaign is launched.
• Legal obligation to disclose – a recipient of confidential information may be required to provide testimony regarding information covered by an NDA. The agreement should make clear that a compelled disclosure is not a breach of the agreement. The agreement should also make clear that the disclosure will be the minimum necessary to comply with the legal requirement. The party who must make the disclosure should be required to notify the other party before the disclosure is made.
• Remedies – the agreement should authorize a party seeking to enforce an NDA to seek injunctive relief to stop further or additional disclosure. Placing such a provision in the agreement should make it unnecessary to prove the legal grounds for obtaining relief. Since calculating the damages from breach of an NDA could be difficult, drafters of an NDA should consider including liquidated damages.
• Permitted disclosures/exceptions - the agreement should outline any specific exceptions or permitted uses of the confidential information. For instance, it might allow disclosure to the employee's legal or financial advisors, provided they are also bound by confidentiality obligations.
• Return or destruction of confidential information - the NDA should specify the employee's obligations regarding the confidential information upon termination of employment or at the employer's request. This includes the requirement to return all tangible forms of the confidential information or to securely destroy it.

2.1.2 Non-compete agreements and non-solicitation agreements

Non-compete agreements prevent a current or former employee from working in competition with an employer. Non-solicitation agreements do not directly prohibit competition, but limit or prohibit a former employee from contacting or soliciting business from customers or clients of their former employer.

Non-compete and non-solicitation agreements are primarily a state law issue. Enforcement is subject to the precedents established in each state with each state having a slightly different approach when it comes to the enforceability of non-compete agreements. In fact, some states may even view non-competes as overly restrictive on competition — meaning they are only enforceable in certain circumstances or not at all. For example, California has a strong policy against non-compete agreements and makes them unenforceable in most circumstances (see Cal. Bus. & Prof. Code section 16600.1).

In states where non-compete agreements are allowed, there are several factors courts often look at when determining if a specific non-compete is enforceable, namely:

• does the non-compete agreement protect an employer’s legitimate business interests, such as confidential business information, or trade secrets?
• is there a reasonable time limitation on the agreement?
• are there limits to specific geographic locations (city, county, region, etc.)?
• is there valid consideration (eg, a new job, more compensation, or stock options) for agreeing not to work for a competitor?

Not every non-compete will be enforceable. Not meeting any of the factors above may be enough to invalidate a non-compete agreement even in states that generally enforce them.

In examining the reasonableness of a time limitation to a non-compete agreement, one court has held it reasonable to expect the employee to not compete during the period of employment but that the limitation ends upon termination of employment. In Techno Lite v Emcod, 44 Cal App 4th 462 (2020) the court stated that ‘During the term of employment, an employer is entitled to its employees’ 'undivided loyalty.'

For further information about non-compete agreements, see Checklist: Drafting a non-compete agreement.

Non-solicitation agreements do not directly prohibit competition, but make it much more difficult for an employee with an established customer base to move to a new job. For instance, an accountant who has practiced for several years with a firm may be subject to a non-solicitation agreement that would prevent them from sending announcements to clients announcing that they will be practicing with a different firm.

Courts often look at a non-solicitation agreement as they would a non-compete agreement. For example, the courts in New York will enforce a non-solicitation agreement if the agreement is:

• reasonable in its duration and its geographic scope;
• necessary to protect the legitimate business interests of the employer;
• poses no undue hardship on the employee; and
• poses no harm to the public, for instance, by limiting the availability of the employee’s services.

For more information, see BDO Seidman v Hirshberg, 93 NY2d 382, 690 NYS2d 854, 712 NE2d 1220 (1999).

2.2 Administrative measures

2.2.1 Policies

Courts have held that valid NDAs with employees and business partners are an essential component in determining whether organizations have taken reasonable measures to protect their trade secrets. But in order to have the best chance of protecting a trade secret, the NDA should be a part of a comprehensive trade secrets policy. Below are additional components to be included in such a policy:

• Establish policies, agreements, and records to provide proof of protection of trade secrets. The policies should explain the types of information that are to be kept confidential, and set out the means for protecting confidentiality. Agreements with specific employees and records of how the information is handled will help to establish that reasonable measures have been taken to preserve confidentiality.
• Incorporate strict measures of confidentiality and electronic and physical security.
• Assess the potential risks of compromising a trade secret by identifying how the information is used and how it could be divulged without authorization.
• Conduct due diligence and manage ongoing third-party procedures by obtaining non-disclosure agreements from employees or contractors.
• Conduct employee and business partner departure exit interviews and request the surrender of company property (eg, files, documents, equipment, etc.).
• Establish an information protection team to be responsible for implementing and monitoring compliance with confidentiality measures.
• Build awareness of the policy with employees and third parties by training the employees who have access to the information.
• Track and evaluate corporate efforts at maintaining security. Make comparisons with the measures taken by other industry members to help provide a benchmark for security efforts.
• Undertake ongoing remedial measures and enhance procedures and policies to limit the damage caused by a disclosure.

This comprehensive approach should be communicated to all employees (eg, through onboarding, etc.) and reinforced with handbooks and ongoing training sessions. Employees who have access to the information should be given additional training and additional reinforcement of the obligations to keep the information confidential. In addition, the company should engage in regular assessments of the trade secrets policy and update as appropriate. Changing lines of business or expanded markets will necessitate a review of a policy and perhaps changes to it.

2.2.2 Procedures

The company should have established procedures in line with the comprehensive policy, including those listed below.

• Provide adequate notification to new employees and business partners through an onboarding process and subsequent training sessions. The notification should include providing copies of relevant agreements to the new employees and business partners and highlighting the importance that the company places on protecting trade secrets.
• Upon departure from employment or at the end of a business relationship the organization should conduct exit interviews and ensure that all the organization’s property (eg, files, documents, equipment, etc.) has been returned to the organization. Finally, terminate any access to the organization’s premises or information (ie, through access badges, emails, or passwords) prior to the exit interview in order to provide the organization with an opportunity to evaluate whether any breach or misappropriation of information may have occurred.

2.2.3 Internal strategy

The organization should establish a trade secrets team and designate a specific individual as the leader of that team with responsibility for the protection of trade secrets. The team should draw on members of the in-house legal staff, risk management personnel, IT personnel, compliance personnel, and human resources staff.

This team should identify, catalogue and document the organization’s trade secrets and establish policies, agreements, and records to provide proof of protection, as well as conduct ongoing assessment of particular vulnerabilities and set priorities for the protection of trade secrets.

The internal strategy should also include development of a predetermined plan or guidelines for protecting secrets and dealing with potential incidents in the event of a breach of trade secret security. This plan should include measures to investigate the breaches, to limit potential damages in the event of a breach, and steps to be taken in the event legal action becomes a necessity.

Step 3 – Prevention: technological tools

In terms of prevention of misappropriation, use technology wherever possible to limit or mitigate damages in the event of misappropriation of trade secrets by employees or other business partners. Besides mitigating the damage, the use of technology will show the extent of the efforts to maintain the secrecy of the information.

Some technological tools that might be implemented include the following:

• disabled USB access on organization devices to prevent unauthorized file downloads;
• implemented technology to monitor employee upload of files to company devices and directories to cloud-based platforms like Google Drive;
• restriction of off-site access to systems or servers;
• use of sufficient encryption;
• employee computer-activity monitoring software; and
• automatic shutoff of employee access upon departure from the premises.

Other technological tools that organizations can consider implementing include cyber security basics (eg, passwords and dual authentication), restriction of access to sensitive information (eg, on- and off-site, physical and electronic), and use of sufficient encryption.

For information on how to manage the use of personal devices for work purposes, see Checklist: Developing a Bring Your Own Device (BYOD) policy.

Additional resources

Related Lexology PRO content

How-to guides:

Overview of US employment law
How to draft an employment contract
How to draft the key provisions of an employee handbook
How to develop a whistleblower policy and reporting program
How to use arbitration agreements in employment
How to prepare for an Occupational Safety and Health Administration (OSHA) inspection
How to comply with the unemployment insurance program 
Overview of workplace harassment
How to understand and comply with wage and hour laws

Checklists:

Determining the difference between an employee and an independent contractor
Dealing with workplace injuries
Developing a Bring Your Own Device (BYOD) policy
Employee drug testing 
Terminating the employment of an at-will employee
Drafting a non-compete agreement
Developing an Equal Employment Opportunity Commission (EEOC) compliant policy
Determining Family and Medical Leave Act eligibility
Determining whether employees are exempt from wage and hour laws
Compliance with child or spousal support orders
Employer compliance with the Patient Protection and Affordable Care Act

Reliance on information posted:

While we use reasonable endeavours to provide up to date and relevant materials, the materials posted on our site are not intended to amount to advice on which reliance should be placed. They may not reflect recent changes in the law and are not intended to constitute a definitive or complete statement of the law. You may use them to stay up to date with legal developments, but you should not use them for transactions or legal advice and you should carry out your own research. We therefore disclaim all liability and responsibility arising from any reliance placed on such materials by any visitor to our site, or by anyone who may be informed of any of its contents.