How Business Owners Can Protect Their Intellectual Property Without Noncompete Agreements

INDONESIAKININEWS.COM -  Noncompete agreements (NCAs) have long been used by companies to protect intellectual property. So what happens whe...

INDONESIAKININEWS.COM - Noncompete agreements (NCAs) have long been used by companies to protect intellectual property. So what happens when they go away?

That's just the question business owners who have come to rely on them are asking their lawyers and human resource experts now. 

While news of the Federal Trade Commission's proposed ban last week remains just that, a proposal, business owners may be wondering whether they have other options for protecting their IP.

The short answer: yes. But be prepared for some "heavy lifting," says Eric Packel, restrictive covenants and trade secrets litigation chair at Polsinelli law firm. 

He notes that leaders will first need to sit down and thoughtfully identify what parts of their business can be classified as intellectual property, and from there re-evaluate employee contracts to figure out how those pieces can be safeguarded.

Still, it's good to have options. Here are four other ways companies can keep their IP (including trade secrets) safe without noncompete agreements:

1. Define your terms

Companies should list general responsibilities in their hiring contracts with new employees. That's a given. With respect to their IP, they'd also be wise to note specific categories of confidential information in their agreements and regularly update them with new categories of confidential information, says Mariko Paul, assistant general counsel and HR consultant at Engage PEO, a Fort Lauderdale, Florida-based professional employer organization. 

These definitions can hold up better in court, should an employee attempt something untoward with your IP.

Trade secrets in the U.S. are defined as information, including a formula, pattern, compilation, program, device, method, technique, or process that derives independent economic value, actual or potential, according to the Uniform Trade Secrets Act (UTSA). 

Keep in mind that the use of a trade secret does not always constitute misappropriation. In order for it to be an illegal practice, it must be acquired through improper means -- say, a breach of confidence, such as utilizing a client list known, internally, to be confidential.

2. Opt for other agreements

The proposed rule from the FTC, on its face, would not apply to non-disclosure or confidentiality agreements, which prohibit employees from using or disclosing their employer's intellectual property for the benefit of themselves or a third party.

In fact, in the materials accompanying the proposed rule, the FTC drew a distinction between non-compete agreements, which it views as improperly restricting the free mobility of labor, and non-disclosure agreements, which generally do not prohibit employees from working in a particular industry or for a particular employer, says Robert Nagle, co-chair of the labor management relations practice at Fox Rothschild.

3. Use federal and state protections

Companies can protect their IP if it qualifies as a trade secret under either a state's UTSA or the Defend Trade Secrets Act. Under these laws, if an employee obtains employment with a direct competitor, they are barred from disclosing, using, or benefiting from your company's confidential and proprietary information.

Employees who misappropriate the trade secrets of their employer may be subject to injunctive relief, damages (including punitive damages), and attorneys' fees, says Chris Marquardt, partner at Alston & Bird, an Atlanta-based law firm. 

Furthermore, the UTSA, which prohibits employees from misappropriating their employer's trade secrets, prescribes stiff penalties for violations. 

In its proposed rulemaking, the FTC took note of the DTSA and various state UTSAs and concluded that these laws and others provide employers with a viable means of protecting their investments in trade secrets.

In most states, courts will enforce agreements that prevent a former employee from taking advantage of relationships developed while on a company's payroll to solicit the customers or employees of a company to follow him or her to a competitive business, says Marquardt. 

With the help of experienced counsel, these and other tools can provide a means of protecting a business's substantial investments in its IP, innovation, training, and goodwill.

4. Establish a rigorous exit process

When employees leave, companies should have a strict process for what should happen. Carolyn Luedtke, partner at Munger Tolles & Olson, a Los Angeles-based law firm, recommends having someone designated to talk to all departing employees to remind them of the their confidentiality obligations and to provide them with a copy of the confidentiality agreement they signed.

Ideally, she notes, the company representative would ask the employee to consider whether they may have inadvertently retained confidential company documents in a number of places, such as cloud-based storage, removable storage devices, personal email, smart phones, or home offices, and the employee would be reminded to return that information. 

Companies can also use data loss prevention software to track improper downloading of files to a storage device or uploading of files to cloud based storage, adds Luedtke. The software can alert employers to the withdrawal of confidential documents.

Source: inc


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IndonesiaKiniNews.com: How Business Owners Can Protect Their Intellectual Property Without Noncompete Agreements
How Business Owners Can Protect Their Intellectual Property Without Noncompete Agreements
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