2020 brought with it a bevy of new challenges for companies of all sizes in every industry, not the least of which was protecting trade secrets and confidential information in the face of newly remote workforces. 2021 brings with it new hope and the promise of a return to “normalcy”—whatever that may mean in this changed world. But companies must remain vigilant about protecting their trade secrets and confidential information. As we enter the new year, here are ten resolutions that companies should make—and keep—to accomplish that important goal in 2021 and beyond.
1. Update agreements with employees and business partners
Although media attention is often focused on hackers and foreign state actors, the vast majority of trade secret misappropriation in the US is actually the work of insiders: employees, vendors, and business partners. One way to minimize this threat is with strong enforceable nondisclosure and restrictive covenant agreements that set clear rules and harsh consequences for a breach. Different states have different requirements for enforcement that periodically change, so make sure to consult Seyfarth’s 50 State Desktop Reference: What Businesses Need to Know About Non-Compete and Trade Secret Law and experienced counsel.
2. Update policies and procedures
Like agreements, clearly drafted policies and procedures set consistent baseline rules and expectations. They should be written in plain English, identify expectations and obligations clearly, and include straightforward rules and procedures for the use, disclosure, and return of confidential information and trade secrets.
3. Keep an eye on emerging legislative trends
President-elect Joe Biden has suggested banning non-competes. The Washington, DC Council just voted to do so. The Federal Trade Commission has been hosting workshops considering its authority to do so. And there has been a trend over the past few years among states to limit their enforceability against low-wage and laid-off employees and/or to impose new consideration and notice requirements, so be sure to keep an eye on Seyfarth’s blog, www.tradesecretslaw.com for any legislative updates.
4. Conduct training sessions
Even the best agreements, policies, and procedures are of limited value if employees and business partners don’t understand them, or worse, don’t know they exist. Training can be a very effective way of explaining the importance of protecting sensitive information, creating a culture of compliance, and ensuring that employees, vendors, and business partners are aware of their obligations. Trainings can be conducted in person, when appropriate, or remotely, either with live trainers or via videoconference or pre-recorded training modules. Seyfarth offers customized options for companies of all sizes.
5. Reassess and improve remote work infrastructure
Remote work will remain the norm at least through the first quarter to half of 2021, and it is likely to maintain a prominent role in our economy for the foreseeable future. As we enter a new year—perhaps with new technology budgets—companies should reassess their technical security infrastructure to account for remote work being a permanent or semi-permanent fixture and to be able to pivot quickly to a fully remote workforce should the need arise again.
6. Develop a comprehensive enforcement strategy.
Having trade secret protections in place is a necessary foundation, but companies should also have an enforcement strategy. Consistency in enforcement not only serves as a deterrent to would be trade secret thieves, but it is also a reasonable protective measure courts may consider in litigation. Some considerations may include: if an employee or business partner misappropriates trade secrets, what court provides the best forum for obtaining injunctive relief quickly? And if a former employee was laid off or terminated without cause, does their non-compete remain enforceable? Perhaps just as important, should the company enforce it, and under what circumstances? Given the current economy, moreover, consideration must also be given to what to do when a wrongdoer accused of trade secret misappropriation is insolvent or about to file for bankruptcy protection: who, when, and where to sue; the effect the automatic stay will have on trade secret and restrictive covenant litigation; and available remedies in bankruptcy court.
7. Create a playbook for remote exit interviews and investigations
Even as companies reopen, many employees may continue to work remotely either all or part of the time. It is therefore imperative that companies continue to be prepared to conduct exit interviews and investigations remotely in the event an employee resigns and is at risk of unfairly competing, or there is concern that a business partner or vendor has misappropriated trade secrets. Exit interviews, witness interviews, forensic examinations, and monitoring and surveillance can all be conducted remotely, and companies should have a playbook in place to quickly spring into action in the event the need arises.
8. Prepare for return to work
With an end to the pandemic in sight, many employees are eager to return to the office. With that comes its own host of issues concerning trade secret protection and restrictive covenant enforcement. For instance, companies must be cognizant of what impact rehiring laid off or furloughed employees has on their prior restrictive covenant agreements: Are new agreements necessary? Similarly, returning employees should be trained on any new policies, procedures, or technology that were implemented while they were gone.
9. Consider using litigation finance to minimize the cost and risk of litigation
The pandemic has caused financial strain on many companies, often causing liquidity problems and/or leading to pressure from stakeholders to limit expenses. This may result in companies not having the resources or institutional will to pursue expensive trade secret litigation, even when the long term benefits would vastly outweigh the short term costs. Companies facing these pressures should consider litigation funding. Seyfarth has a task force dedicated to analyzing appropriate opportunities and litigating cases under this unique funding structure.
10. Conduct a trade secret audit
The beginning of a new year is always a great time to take stock of what trade secrets a company has and how well they are being protected. A trade secret audit, performed by experienced outside counsel so as to preserve the attorney-client privilege, is one way to do just that. Seyfarth offers customized options for companies of all sizes.
Of course, having trade secrets and confidential information to protect is a good problem for companies to have, because it means they have created something of value—a new product, a unique formula, an innovative process—that is worth protecting. So, while making sure to protect their intangible assets, above all else companies should keep inventing, innovating, and investing in new ideas and good people for a prosperous 2021 and beyond!