The unprecedented nature of COVID-19 left many businesses scrambling to develop telework policies and proprietary protections. It’s challenging to protect company secrets with employees working from family computers in their living rooms, and this was understandably low on the priority list for struggling companies. While you may trust your staff, protecting corporate trade secrets involves more than preventing intentional theft. Federal and state laws require businesses to actively prohibit public access to proprietary information to obtain trade secret protections and damages. The experienced trade secret lawyers at McClanahan Powers, PLLC, can help Virginia and D.C. small businesses develop legally compliant policies to protect their trade secrets from misappropriation. Schedule your remote work policies and trade secret protection analysis today by calling (703) 520-1326 or contacting us online.
Ensuring Confidential Corporate Information Qualifies as a Trade Secret
The Federal Defend Trade Secrets Act (18 U.S.C. § 1839) –which D.C. and Virginia legislation mirrors – defines trade secrets as any business, scientific, financial, or technical information that: (1) an owner takes reasonable steps to keep confidential; (2) derives actual or potential value from not being publically known or easily discovered, and (3) allows another person to obtain economic value from its unauthorized use or disclosure. Statutory examples of qualifying trade secrets include:
- Engineering plans and designs
- Formulas
- Prototypes
- Patterns
- Business methods and techniques
- Programs and procedures
- Codes and complications
Trade secrets may include physical items, i.e., drone prototypes, or intellectual property such as programing codes or drink formulas. Whether it’s stored electronically, physically, photographically, or in writing, your property may qualify for trade secret protection. Importantly, failure to keep the information safe from easy discovery, i.e., family members logging onto home computers, could destroy federal and state trade secret protections. Therefore, you must take steps to prevent easy discovery of these secrets, especially when employees can remotely access confidential business information.
Remote Work Mistakes that Might Destroy Trade Secret Protections
Trade secret owners must prevent their confidential information from being reasonably obtainable by lawful means. Many companies did not have password-encrypted corporate laptops or VPN applications in place when stay-at-home orders took effect. Virginia employees often conducted business with personal computers, smartphones, and third-party applications, such as Zoom and WhatsApp, to stay afloat. Few companies had thorough telework and computer use policies in place, and even fewer had employees sign confidentiality agreements applicable to homework environments. Consider the following three remote work examples of potential trade secret disclosure:
Example 1
An employee participates in an all-staff Zoom meeting to discuss confidential business strategies. Everyone in the home, including her roommates, can hear the meeting discussion. This may result in lost trade secret protection if the roommate starts a business using parts of your corporate strategy or sells the ideas to another company. However, the roommate lawfully heard the discussions and had no legal obligation to protect the trade secrets.
Example 2
An employee uses his daughter’s tablet to log into his remote workspace and downloads trade secret information, such as client lists and sales strategies. The daughter sees and sends this information to help her friend in a similar industry. This may result in trade secret disclosure without legal protections because no employee policies or protections existed to prevent these actions.
Example 3
An employee prints otherwise confidential blueprints at his home and leaves them on the kitchen table. His father-in-law sees these blueprints and asks his contractor to add specific designs to the building house. He lawfully viewed the confidential information and had no obligation to the trade secret’s owner. However, if his contractor continues using the design in future houses, this may result in lost trade secret protections.
Confidential trade secret information has unintentionally reached multiple third parties during the pandemic. From discussing sales techniques while shopping to using another person’s technology to conduct remote work, you might waive otherwise viable trade secret misappropriate claims without written policies and protections in place.
Steps for Protecting Remotely Accessible Confidential Information
Small businesses need not take cost-prohibitive steps to qualify for trade secret protection, i.e., hiring 24/7 digital security and encryption services. The law only requires that an owner take reasonable steps to protect confidential information from being easily accessible. The dedicated trade secret protection attorneys at McClanahan Powers, PLLC recommend working with local counsel to develop and implement the following:
- Detailed confidentially and non-disclosure agreements for employees and independent contractors
- Computer protection policies, i.e., instructions for using company-provided headphones and privacy screens at all times
- Computer use policies, i.e., agreements preventing third-party access to company laptops, prohibiting certain downloads, and limiting access to necessary personnel
- Home office agreements, i.e., locking the home office door or placing company laptops in secured areas
- Double password protection and trade secret encryption programs, i.e., one non-sharable password to access the laptop and another to access the program containing confidential information
- Document printing and out-of-office access policies
Putting these procedures in writing, setting up password protection, and providing employees with headphones and privacy screens costs less than you’d think. Trade secret owners generally maintain the benefits of federal and state misappropriate protections – including qualifying for potential double (Va. Code § 59.1-338) or triple damages (18 U.S.C. § 1832) and attorneys’ fees – by taking reasonable steps to protect their property. You’re generally protected even if a roommate steals your employee’s password, hackers listen to Zoom meetings, or former employees unlawfully take trade secrets to competitors.
Prevent Unintentional Trade Secret Disclosure by Developing Telework Policies with McClanahan Powers, PLLC
Many companies developed hybrid remote work policies as COVID-19 restrictions eased; some even permanently transitioned to virtual offices. Unfortunately, these changes necessitate updated confidentiality agreements and trade secret protection strategies. Taking simple efforts to protect your valuable business strategies, prototypes, and formulas from disclosure can save your company and increase marketplace value. The Virginia and D.C. trade secret protection lawyers at McClanahan Powers, PLLC, can conduct a misappropriation risk analysis and develop unique remote work policies to protect your corporation’s proprietary information. Connect with our experienced business attorneys today by calling (703) 520-1326 or contacting us online.