Setting Out on Your Own? 4 Steps to Avoid Trade Secret Claims
Recently, a former Google engineer was caught at the center of a lawsuit after taking technology trade secrets to his new role at Uber. The result: an 18-month prison sentence and millions of dollars at stake. There are countless cases out there like this one—some not quite as egregious—but equally as damaging to the businesses and individuals involved. Trade secrets are not to be handled lightly, and accusations of misappropriation often lead to litigation and damages.
It is imperative to understand your rights and obligations as an employee before setting out on your own, and take steps to avoid any accusations of impropriety or worse, a lawsuit. The business attorneys at Hendershot Cowart, P.C. break down what you need to know:
1. Understand what constitutes a trade secret.
Trade secrets are a vital part of a business’s success. As such, there are laws in place to protect that information. In Texas, trade secrets are protected by the Texas Uniform Trade Secrets Act (TUTSA).
According to TUTSA, a trade secret is any information that:
- Has either actual or potential independent economic value derived from its secrecy,
- Has value to others who cannot readily or legitimately ascertain the information, and
- Is subjected by the owner to reasonable measures to keep the information secret.
It’s important to know that all three elements are required for the information to be considered a trade secret. For example, if an employer has not made reasonable efforts to protect its business plan, that plan is not a trade secret. If a client list can be ascertained through a simple Google search, it is public domain and not a trade secret.
2. Don’t do anything fishy.
Of course, the best way to avoid a trade secret claim is not to take any confidential or proprietary information. You should also take pains to avoid any activities that might appear suspicious. Promptly return all company property, including laptop, cell phone, building keys, security badges, etc. Do not log on to your former employer’s online portals or programs after you leave. Don’t make hard or electronic copies of any company materials, forms, client lists, or work products. Do not download files from your company computer to a flash drive or send emails to your personal email address. If you do need to remove personal files from your company computer, ask HR to look over your shoulder to avoid any hint of impropriety.
3. Be aware of confidentiality agreements.
When you first became an employee, you may have signed a stand-alone confidentiality agreement, or it may have been included as a provision in your employment agreement. It’s important that you understand your obligations under that provision, and inform your new employer of any agreements in place. A confidentiality agreement does not expire with your employment and may be in effect indefinitely.
If you join another employer, the hiring company should also include clauses in their employment agreement with you that they are aware of your confidentiality agreement and respect and will comply with those provisions. In the event of a lawsuit, these steps would demonstrate the company’s good faith.
4. Do not breach your fiduciary duty of loyalty.
Even if you don’t have a written agreement, in some states like Texas, employees owe a fiduciary duty of loyalty to their employer. Under this duty, an employee cannot exploit for their own benefit an asset or opportunity that belongs to the employer or divert business from their employer while still employed.
“However, there are limits to this duty,” says business law expert Trey Hendershot. “If you are an at-will employee, you can plan to compete while you’re still employed; you just can’t compete. You can form a competing business, but you cannot start soliciting clients, customers, or fellow employees while still employed.” And, unlike a confidentiality agreement, the fiduciary duty of loyalty expires upon termination.
Likewise, general knowledge and skills acquired on the job are not protected by TUTSA. “An employee cannot be enjoined from using the general knowledge, skill and expertise learned during employment,” says Hendershot. “If you’re a home builder, for example, you know the steps it takes to build a house—from foundation to framing, plumbing, etc.—and you are permitted to leverage that knowledge in your next endeavor.”
As you set out on your own or move to your next venture, it is best to err on the side of caution. If you are unsure whether information is considered a trade secret, consult a lawyer who can assess the risks and help you avoid trade secret misappropriation.
Hendershot Cowart, P.C. is available to guide you through to the next steps. Call us at (713) 909-7323 to schedule a consultation with our business attorneys.