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Kathleen E. Cross
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Self-help is critical to a business in protecting its proprietary or confidential information. No court will treat business information more confidentially that the business has itself. As the Commonwealth’s highest court noted in USM v. Marson Fastener Corp.: “one who possesses a trade secret and wishes to protect it must act to preserve its secrecy.” When a key employee has jumped ship to a competitor after working on a state-of-the art project for your business and you seek the aid of the court to stop the exploitation of your proprietary plans and designs, the time to ramp up internal protection of that information is long past. Precaution, constant self-evaluation, and diligence with respect to internal confidentiality procedures needs to happen from the inception of your plan, design, process, strategy or customer list. Such measures will not only support your effort to stop disclosure in a court proceeding, but may discourage misappropriation altogether. Below you will find some practical suggestions for keeping what’s yours.
Should an employee leave your employ and you suspect that he is using the fruits of your investment to benefit a competitor, you may (and often do) engage an attorney to go to court and obtain an injunction preventing use of your proprietary material. From a legal perspective, courts analyze claims of misappropriation of trade secrets or confidential information generally in a two-part inquiry: first, is the information recognizably confidential, and second, was the information treated as such by its owners. These two questions were broken down into more detailed factors in Jet Spray Cooler, Inc. v. Crampton: 1) was the information is known outside the business, 2) was it is widely known within the business, 3) were the measures taken by the business to guard the secrecy of the information, 4) what is the relative value of the information to the business versus to competitors, 5) what was the cost to the business of developing the information and 6) what is the level of effort required to duplicate or properly obtain the information (the “Jet Spray Factors”).
1. What Information is Protectible? A court confronted with a confidentiality claim will look to the information at issue and ask: does this business information provide the owner with an opportunity to gain a business advantage over competitors? The information cannot be considered public or general knowledge in a particular industry, or general knowledge or skill acquired by a former employee during the course of his employment. Furthermore, information that is merely an idea or goal without trade value may not be eligible for protection. Some of the types of information that have been considered trade secrets or protectible business information in a given context under the Jet Spray Factors include: designs and blueprints products or significant modifications to products, engineering information, manufacturing processes, merchandising techniques, customer or client information (including purchasing history and contacts), information concerning financial condition, supplier lists, pricing information and sales information.
2. How Should Information Be Protected Internally? As stated above, key to a determination of the protectibility of business information is the manner in which the business treats that information in the course of its business life. While the Supreme Judicial Court has rejected the notion that a business needs to erect an “impenetrable fortress” around its trade secrets, it has required, “reasonable precautions against predatory eyes.” Obviously, the nature of a “reasonable precaution” will depend on the nature of the information at issue. While the Commonwealth has a civil trade secret statute (M.G.L. c. 93, § 42), most trade secret/confidential information cases include a common law count that provides protection to a broader category of information. Both types of claims look to the business’s treatment of its own information. Appropriate indicia of secrecy have included the following:
Confidentiality Agreements: For key employees, include confidentiality/non-disclosure provisions in employment agreements (which should be periodically updated as the employee advances within the business); for at-will employees, confidentiality agreements can be initiated separately. Written employment agreements will also help with claims under the trade secrets statute, which allows injunctions to be obtained more readily where such an agreement exists. M.G.L. ch. 93, § 42A. In addition, confidentiality notices for particular projects are also useful.
Restricted Access to Information: Keep proprietary developments/secrets physically separated from routine business functions; provide security (password protection, locked doors, guards where appropriate; exclude public, customers, tours, etc.); adopt accountability system (log for use of information; routing lists; document retention policies)
Designation of Information as Confidential: Designate confidential information on its face; educate the workforce with instructions for appropriate/inappropriate use of confidential information through publication of company policy; in the event of necessary disclosure to third parties (customers, licensees, possible business acquisition partners), require confidentiality agreements from all who receive proprietary information.
Nondisclosure of Confidential Information: Prohibit proprietary information from appearing in marketing materials, websites, trade publications or articles, and research papers.
The critical ounce of prevention for any business with information it cannot afford to lose is to adopt systems to preserve confidentiality as early as possible. All businesses with substantial proprietary information, especially those that have grown over time without special attention to internal confidentiality procedures, should annually undertake a confidentiality audit to ensure vital business information is adequately protected.
