Protecting Confidential Information and Trade Secrets Protecting Confidential Information and Trade Secrets Presented by Michael C. Sullivan Denise N. Brucker

Paul, Plevin, Sullivan & Connaughton LLP Applicable Laws Uniform Trade Secrets Act (CC §§ 3426 et seq.) –Derives economic value from not being known –Is the subject of efforts to maintain secrecy –Includes: Customer lists and information Techniques, formulas, specification Business and Professions Code § 16600

Paul, Plevin, Sullivan & Connaughton LLP Key Cases Public policy favors “open competition” –Hill Med. Corp. v. Wycoff (2001) 86 Cal.App.4th 895 –Vacco Industries, Inc. v. Van Der Berg (1992) 5 Cal.App.4th 34 CA rejects “inevitable disclosure” –Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443

Paul, Plevin, Sullivan & Connaughton LLP Key Cases Beware of “wrongful termination” –D’Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927 –Thompson v. Impaxx (2003) 113 Cal.App.4th 1425 Employee solicitation may be prohibited –Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268

Paul, Plevin, Sullivan & Connaughton LLP Recent Cases Narrow restraint doctrine rejected –Edwards v. Arthur Andersen (2006) 142 Cal.App.4th 603 “No-hire” agreements unenforceable –VL Sys., Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708 Fending off employee solicitation –CRST Van Expedited v. Werner Enterprises, Inc. (2007) 479 F.3d 1099

Paul, Plevin, Sullivan & Connaughton LLP Best Practices Overview Review/revise agreements and policies Analyze “institutional” protections Address issues at all employment stages –Recruiting –During employment –Termination and after

Paul, Plevin, Sullivan & Connaughton LLP Nondisclosure Agreements Revise your NDAs –Define “confidential information” –Include invention assignment (LC § 2870) –Revise non-solicitation clauses –Consider non-compete issues –Protect CI/TS information of others

Paul, Plevin, Sullivan & Connaughton LLP Audit “Confidentiality” Policies Employee handbook provision –Require employee acknowledgment –Update/revise periodically Employee “blogging” policy –Prohibit disclosure of and define CI Computer network and internet policy Others?

Paul, Plevin, Sullivan & Connaughton LLP “Institutional” Protections Maintain “secrecy” of information –Control access to information Computer passwords Sign-out sheets Visitor logs –Ban cameras (including cell phone cameras) –Require third-party confidentiality agreements

Paul, Plevin, Sullivan & Connaughton LLP “Institutional” Protections Implement document protection procedures –Proprietary legends –Copyright notices –Color coding –Locked file documents –Copying limitations –Waste disposal methods

Paul, Plevin, Sullivan & Connaughton LLP “Institutional” Protections Look for inadvertent disclosure –Marketing materials –Company website –Employee blogs/presentations –Annual reports Review computer networks –Firewall protection –Data encryption

Paul, Plevin, Sullivan & Connaughton LLP Applicant Recruiting NDA for interview process –Protect information disclosed during interview –Prohibit disclosure of others’ information NDAs with former employers? –Ensure legal review Provide secrecy instruction Avoid detailed, technical questions

Paul, Plevin, Sullivan & Connaughton LLP Hiring From A Competitor Consider how applicant is contacted –In writing and by whom? –Reflected in “on-boarding” documents? Provide secrecy instruction early and often Carefully draft offer letter –Include prohibition against disclosing others’ information

Paul, Plevin, Sullivan & Connaughton LLP Hiring From A Competitor Reminder following acceptance Establish “ethical walls” –Restrict certain projects –Segregate information –Written instruction to all employees Responding to cease and desist letters

Paul, Plevin, Sullivan & Connaughton LLP During Employment Annual “employee awareness program” –Written reminders –Memoranda from executives Require NDAs and invention assignment Employee training –Identifying confidential information –Restrictions on its use and disclosure

Paul, Plevin, Sullivan & Connaughton LLP Termination and Post Employment Exit interview –Oral and written reminder of obligation –Obtain written reaffirmation –Provide a copy of employee’s NDA –Obtain all company property Engineering notebooks Marketing/business plans Financial information

Paul, Plevin, Sullivan & Connaughton LLP Termination and Post Employment Preserve integrity of EE’s computer – s –Hard drives –Back-up tapes Letter to employee’s new employer –Notify of post-employment obligations –Provide copy of NDA

Paul, Plevin, Sullivan & Connaughton LLP Questions?