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Nice People DO Finish Last: Protecting Your Assets Bernie Fuhs 313.225.7044

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Presentation on theme: "Nice People DO Finish Last: Protecting Your Assets Bernie Fuhs 313.225.7044"— Presentation transcript:

1 Nice People DO Finish Last: Protecting Your Assets Bernie Fuhs

2 Presentation Highlights Critical steps to protect your assets and relationships Types of restrictive covenants (non-compete, non- solicit, confidentiality) and Trade Secret law Issues with Social Media Practical issues with increasingly competitive job market Action plan to keep the genie in the bottle Image courtesy of Walt Disney©

3 Your Assets Are At Risk Three Critical Steps to Protect Them 1.Know what assets you have to protect 2.Available preventive measures to protect your assets 3.Immediate action/remedies when your assets are threatened

4 What You Are Up Against

5 Economic Times Good or Bad – Same Concern Job hopping or looking for a better opportunity while preparing to leave when an opportunity arises Increased movement in 2012 All about the Benjamins

6 It has become appallingly obvious that our technology has exceeded our humanity. ~Albert Einstein 8 GB thumb drive = 10 CD-roms or 160,000 Word documents Only $12.99 $ billion in annual losses due to trade secret misappropriation

7 Why Do They Feel Justified Stealing Your Assets and Relationships? The justifier (I built it, its mine) The thief (no one will know if I take some information and contact these customers) The lawyer-wanna be (cant prevent me from doing this; those agreements I signed are not enforceable) The blissfully ignorant (I didnt know or think it was a big deal)

8 STEP ONE Know What Assets and Relationships You Have to Protect

9 Examples Customer lists and information Engineering designs, processes, techniques Prices, costs, margins, mark-ups, metrics Internal weaknesses Marketing and strategic plans

10 The Relationships = The Key to Success Customer Client Vendor Supplier Employee Consultant/contractor

11 STEP TWO Preventive Measures to Protect Your Assets

12 Restrictive Covenants Non-Competition – Most effective protection – Subject to most scrutiny Non-Solicitation – Typically easier to enforce than non-compete – More geared towards protecting relationships Confidentiality/Non-Disclosure – Generally easily enforceable – Less effective with trade-secret protection

13 Practical Issues in Todays Job Market Increased movement in 2012 More competition for top talent Increased leverage for potential employees Less willing to sign non-compete agreements

14 Strategies to Deal with Practical Issues Team approach – We all sign them – Protects all involved Narrowly tailor the agreements – Duration – Geography (limited to customers and/or areas that person is responsible for and/or exposed) – Scope of activity (limited to types of projects, areas of responsibility, etc.) Communication Additional consideration

15 Enforceability of Restrictive Covenants Be aware of Employee location - certain states look unfavorably upon non-competition covenants (i.e. California, Oklahoma, North Dakota, ) Some states will blue pencil; some will not Movement towards making non-competition agreements easier to enforce (i.e. Texas, Georgia)

16 Trade Secret Law (works with non-compete/non-solicit agreements) UTSA – The Uniform Trade Secrets Act (UTSA) (in place in 46 states except MA, NJ, NY, and TX) defines a trade secret as: – information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following: Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

17 The Growth of Social Media Facebook – Over 1 billion users LinkedIn – Over 175 million users Twitter – Over 500 million users Google+ - Over 400 million users Image courtesy of Vabulous Media©

18 Who Owns the Social Media Accounts? Social media accounts MAY be considered protectable trade secrets Outline ownership and access at the outset of employment if at all possible Beware of demanding or even asking for usernames and passwords to social media accounts (Social Media Privacy Bills – including Michigan)

19 Solicitation - Practical Advice Scarcity of case law on emerging technology Predict outcomes based on existing case law – Solicit via FB message = soliciting by – DiFonzo (Mass) – FB announcement by new employer = no solicitation Its the substance of the message (same look), not the medium (different name) Who initiated the contact and what was the substance of the contact Its the same look!

20 Planning/Preparation – Be Proactive Worry about misappropriation of your assets the day that you hire – not the day that you terminate or he resigns Consult with the experts – legal and business Engage your experts (legal and business) to conduct an audit

21 Planning/Preparation – Be Proactive Take inventory of the assets & relationships to protect Take inventory of what protections in place Understand the weapons available to you – agreements, statutes, business solutions

22 Available Weapons – Reasonable Steps for Protection Appropriate agreements (one size does not fit all) Information storage – locked or password- protected Limited, need-to-know access Clear marking of confidential information Visitor restrictions Third-party confidentiality agreements Employee policy on confidential information

23 Available Weapons – Reasonable Steps for Protection Routine verification of confidentiality procedures Prohibiting removal of confidential information from company premises and limiting copying Conducting exit interviews Pursuit of departing employees with access to confidential information - consistent enforcement Avoidance of industry wars – review of candidates restrictive covenants – Reps and warranties that candidate did not take and will not use previous employers information – Indemnification provisions

24 Deploying Your Weapons – Implementation of Asset Security Plan Require employees to sign your agreements Obtain employee buy-in and be prepared to deal with resistance Include appropriate language in your contracts (dont forget vendor contracts, i.e., data security laws) Take the steps necessary to guard the confidentiality of your information

25 Avoid Unnecessary Disclosures & Inconsistency Company brochures/product guides and websites Customers/clients (and information conveyed to them) Severance agreements superseding employment agreements void Prior departures by similarly-situated employees Resolution of prior non-compete/non-disclosure litigation How many employees sign/do not sign similar agreements

26 Exit Interview New employment (where, what position) Return of materials Acknowledgment form Social media accounts

27 Beware of Disciplining Employees for Social Media Posts NLRA Section 7 concerted activity NLRBs involvement and scrutiny of social media policies Fine balance between disciplining employees and protecting trade secrets or enforcing agreements (use a disclaimer or savings clause)!

28 Beware of Horizontal Non-Hire & Non- Solicitation Agreements Agreement with competitors not to hire or solicit each others employees is horizontal – Different concerns than typical employee (vertical) non-compete – Must be reasonably necessary to facilitate a pro-competitive agreement (ancillary) May violate anti-trust laws 2010 Silicon Valley Cases (DOJ v. Google, Apple Pixar, Adobe and Intel) – Alleges bilateral agreements to not cold call each others skilled (technical) employees; – Employers immediately settle with consent decree Consent decree allows non-solicitations reasonably necessary for a legitimate collaboration agreement – Follow on class action lawsuits filed

29 STEP THREE Immediate Actions/Remedies When Your Assets Are Threatened

30 Action Plan Critical to have experienced attorneys and business advisors prepare an action plan Protocol for departing employee Step-by-step actions identified for potential breach

31 Your Assets Have Been Taken or Are at Risk – Now What? Move quickly and aggressively (where appropriate) Get your experts involved immediately Preserve the evidence (electronic evidence is crucial – do not attempt to play Sherlock Holmes)

32 Dont Diddly Do! Image courtesy of Matt Groening and Fox©

33 Final Pointers Police confidentiality measures Draft enforceable non-competes Beware of horizontal agreements with competitors Beware of social media issues Have a strategy in place for practical hiring issues Be cautious with subsequent agreements Make good termination/discipline decisions Consistently enforce Act swiftly Preserve all documents and computer evidence

34 Questions? Bernie Fuhs


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