Counsel to Counsel - May 2008 - (Page 15)

Hard Choices Common distributors and common suppliers are liabilities companies frequently overlook—they know your industry and lingo and have the same close relationships with your competitors. It’s all too easy for critical information to leak out inadvertently. Even more troublesome is dealing with the independent inventors who often approach companies to sell their innovations. If the company turns the inventor down, then later develops a similar product, the inventor cries foul and wages a thorny David-and-Goliath litigation. “This is an area where companies get bit a lot,” says Kahnke. “There was just a $21 million-plus verdict handed down in Illinois against Sears. It was a classic example. These disputes are highly problematic because the burden of proof is effectively on the company. If you get in front of a jury, you really face an uphill battle.” The best way to protect trade secrets is to prevent disclosure in the first place. But if you do experience a leak, it’s imperative to move with speed—first to determine the extent of the breach and, if necessary, to move to litigation. “Just because an employee leaves and goes to a competitor, it doesn’t mean they’re misappropriating your trade secrets,” explains Bundy. “What you need to ask is: What’s their role at this new company? Do you have any evidence that they have misappropriated your trade secrets or that they are going to? If so, you need to act quickly.” You can file a complaint based on a threat of misappropriation. It’s not necessarily that they have disclosed information, but that there’s a real threat that they might. Furthermore, just because someone discloses key information, it doesn’t mean it is no longer a trade secret. “It’s a little counterintuitive, but if you act fast you may be able to correct a limited disclosure through prompt litigation—and your trade secret still can be protected,” Bundy says. “Plus you’ll have taken reasonable efforts to maintain its secrecy, so if someone else misappropriates it in the future, that confidential information may still be considered a trade secret under the law.” To protect trade secrets you have to choose which information you’re most concerned about. According to Randall E. Kahnke, a partner at Faegre & Benson, this is one area that companies too often neglect. “We had a case where a former employee started a competing venture,” Kahnke says. “The CEO of the plaintiff, a large company, was on the stand. He took the position that his company had informed the employee of what information was confidential. The cross-examination was beautiful.” It went something like this: Q: You gave your employee a confidentiality agreement and expected him to comply with it, right? A: Yes. Q: So, to allow him to comply, you put him on notice of what your really confidential information was, so he would know what he had to hold close to the vest? Choose or Lose After identifying the primary risks, it’s essential to work with your employees and executives to create a culture of confidentiality. “If you train your employees about trade secrets when they first arrive, you can set the ground rules,” says Kerry L. Bundy, also a Faegre & Benson partner. “If you can show them the value of taking steps to protect confidential information, it makes them feel more important to the process, and you can better collaborate with them on how to protect that information.” People need to know exactly what is secret and how to protect it. That means the company must choose its most important secrets and prioritize their protection. One thing that has proved ineffective is merely stamping everything confidential. (See Hard Choices.) “If you try to protect everything, you may end up protecting nothing,” says Bundy. Companies should draft a written trade secret protection plan and work with employees in person to implement it, not just send a memo and put it on file. The time you put into in-person training makes a real difference and clearly communicates that the business is serious about its secrets. Adding physical and computer security measures also safeguards information both literally and by creating the distinct aura of confidentiality for employees and business partners. A: Absolutely, that’s true. Q: And one of the ways you did that was by marking your documents “Confidential”? A: That’s right. Q: Here’s one of those documents, your business plan that you claim he misappropriated. You stamped every page confidential. Faegre & Benson LLP offers clients more than 525 lawyers worldwide in a full range of practice groups, with experience in legal matters throughout the United States, Europe and Asia. The firm has conducted multiple high-profile cases involving trade secret issues, including litigation against competitors alleging misappropriation of trade secrets and defense of companies facing similar allegations. Article Participants: Kerry L. Bundy Partner kbundy@faegre.com randall E. Kahnke Partner rkahnke@faegre.com Peer Review Rated A: Correct. Q: Here’s another document that was stamped confidential, and by stamping it confidential you were telling your employee that this is something you really care about, isn’t that right? A: Yes. Q: Do you know, sir, that this was actually used as marketing information at an industry conference and was handed out to anyone for the asking? A: Uh … “End of the case,” reports Kahnke. “That was the critical moment for the jury. The point is: To protect is to choose.” martindale.com/c2c May 2008 15 http://www.martindale.com/c2c

Table of Contents Feed for the Digital Edition of Counsel to Counsel - May 2008

Counsel to Counsel - May 2008 Contents Harassment Policies NEC Corporation of America and Duane Morris LLP Lost or Stolen Data: Minimizing Fallout On-Boarding the Board Drafting Fair, Efficient and Enforceable Arbitration Agreements Responding to Counterfeit Products Crafting an English-Only Workplace Policy Distressed Debt: New Players, Global Sophistication Make Restructuring More Complex IP Confidential: Plan Ahead, Act Fast to Protect Your Trade Secrets Adverse Changes: Think Ahead in a Strained M&A Market Optimizing Web 2.0 Technology: Expanding Your Professional Network Union Pacific Railroad Company and Patton Boggs LLP Warming Warning: Develop Your Climate Change Strategy Now Risk Sharing: Expect New Obstacles and Expenses in Syndicated Loans E-Discovery in Action Diversification at the Gate Energy

Counsel to Counsel - May 2008

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