Trade Secrets: Protecting Trade Secrets When Employees Terminate

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September 19, 2005

One of the most likely times to lose trade secret protection occurs when an employee leaves the company. If there are feelings of resentment, the employee may want to harm the employer by revealing its secrets, thereby diminishing its competitive edge. The employee may also mistakenly feel that he or she will be more valuable to a new employer if such information is used for the benefit of the new employer.

Employers can take certain steps to safeguard their trade secrets under these circumstances. For example, before employment is terminated, the company should conduct an exit interview between the departing employee and the employee’s supervisor. In larger companies, the appropriate representative may come from the human resources department.

At this interview, the supervisor or other representative should reinforce the company’s trade secrets protection policies and the employee’s nondisclosure obligations. The employer should also collect from the employee any of the company’s property that previously was not returned, such as trade secrets materials (i.e., engineering notebooks, business plans, marketing plans, customer lists, etc.), keys, pass cards, computer diskettes, identification badges and any other tangible items that the employee may have kept at home or on a personal computer for his or her convenience.

The employee should also be asked to return all paperwork, files, computer information, documentation and other materials obtained by virtue of his or her employment. The employer should ask the employee to reaffirm in writing, either in a termination certificate or severance agreement, any prior confidentiality or nondisclosure agreements that the employee has signed. Even if the employee refuses to sign such a certificate, the company has still protected its interest by indicating to the employee that it takes such issues seriously. The employer should send a post-interview confirming letter to the former employee if the employee does not sign a termination certificate.

If an employer has any suspicion that the employee is going to join a competitor and has reason to believe that the former employer’s trade secrets will be used or divulged, the employer should contact employment counsel to discuss contacting the new employer and advising the new employer about the employee’s nondisclosure obligations.

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