Page 7 - Intellectual Property

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Intellectual Property | MONDAY, APRIL 4, 2016 | S7

lists, customer requirements and pricing, employee from not only using the informa- consult with counsel to draft and/or review to company information, post-employment

source code, market research, and business tion taken, but also continuing to operate their restrictive covenants prior to presenting obligations and prohibitions, etc.
plans.
his competing business. While the court them to their employees, particularly with the • Collect and secure computers and elec-
granted the injunction with respect to the recent trend to invalidate entire covenants if tronic devices used by terminated employees.
What Is the Biggest Threat?
use of the information and required that there exists evidence of overreaching and/ Computers and electronic devices need to
the information be returned and his com- or coercion.10
be set aside in a secure place and, without
Notwithstanding the time and resources puter, other electronic devices and cloud In addition to the use of reasonable exception, not placed back into circulation
clients often expend in developing valu- and other storage applications scrubbed restrictive covenants tailored to the spe- unless such computers and devices have
able trade secret information, they remain at plaintiff’s cost, the court refused to enjoin ciic employee with access to trade secret already been imaged by a forensic consultant.
vulnerable to the insider threat posed by operations of the competing business due information, clients must implement policies Lastly, given the signiicant risks posed

their own employees.
to the absence of a non-competition agree- designed to protect their valuable informa- by employees to a client’s trade secret
It used to be that companies had to ment or strong evidence that the commer- tion. Many clients, however, continue to grant information and other intangible assets,
worry principally about the theft of physi- cially sensitive information was actually certain of their employees, even those with it is advisable for clients to routinely have
cal iles; this of course evolved as technol- accessed and used post-resignation. Not no legitimate business reason, nearly unfet- their policies and procedures, as well as
ogy changed from the use of loppy disks, only does this case illustrate the need for tered access to what they consider to be their their restrictive covenants, audited and
to CDs and DVDs, to the use of personal companies to implement policies designed trade secret information. It is imperative for updated to better ensure that they are in
email accounts, to small USB based thumb to detect the use of cloud-based storage a client hoping to obtain trade secret pro-
compliance with the ever-changing law and
drives to download and abscond with sen- applications, but also for the use

sitive electronic iles. Today, while some of reasonable restrictive covenants
of these—thumb drives and personal (e.g., non-disclosure and/or non-
email speciically—continue to be used competition covenants) with strong
by employees and present threats to our attorney fees and cost shifting With new technologies being developed every day,
clients, they are far easier to prevent and provisions.
detect than the potentially catastrophic With new technologies being it is imperative to advise clients regarding the risks
threat posed by cloud computing gener- developed every day, it is impera-
ally and cloud-based storage speciically. tive to advise clients regarding presented by employees generally and the use of
These “USBs in the sky” allow an employee, the risks presented by employees cloud-based storage, as well as the steps that can and

who has access to commercially sensitive generally and the use of cloud- should be taken to help lessen the risk of theft
information and a personal cloud stor- based storage and other means to and detect any such theft in a timely manner.
age account through Dropbox, OneDrive, abscond with information, as well
Google Drive, iCloud, etc., to upload trade as the steps that can and should be
secret and other conidential iles to the taken to help lessen the risk of theft
“cloud.”5 Once on the cloud, an employee and, in the event that an employee
can and oftentimes does access, down- succeeds, detect any such theft in
load and transfer to third parties his/her a timely manner.
employer’s trade secret and other com- tection from the courts to implement some best practices. As any trade secret litigator

mercially sensitive information. Not only Protecting Against Insider Threats
combination of the following common sense (or any business owner forced to litigate
can this cause signiicant and potentially policies:
a trade secret in court) will surely attest,
irreparable harm to a client if the informa- One of the best—and most common— • Limit access to trade secret information the nominal cost to a client associated with
tion falls into the hands of a competitor, ways to protect trade secret information, to only those employees who need it to per- such a periodic preventative audit pales in
but the fact that it can be disclosed to third as well as the customer relationships and form their job responsibilities. Not only does comparison to the costs associated with
parties and, in essence, made public, could goodwill that an employer spends signii- this limit the universe of potential threats, either the loss of a trade secret or litigation
very well deprive the client of the ability cant time and resources in developing, is but it also shows a court that reasonable to protect and enforce trade secret and
to obtain trade secret protection of that through the use of reasonable restrictive steps were taken to protect information in other related rights. As the old saying goes,

information down the road.
covenants, such as non-disclosure, non- the event that a theft occurs and protection is an ounce of prevention is worth a pound
We are just now starting to see published competition and/or non-solicitation provi- needed.
of cure.
cases coming out in state and federal courts sions. Not only are restrictive covenants • Implement policies to address the use •••
involving the use of cloud computing for effective in preventing trade secret theft, of cloud storage. With respect to personal ••••••••••••••••••••••••••
the purpose of misappropriating trade but courts have made clear that where cloud-based storage, it is recommended 1. David S. Almeling, Tracking Trade Secret Stats (2010).
secret information. For example, in a case an employer fails to use such covenants, that clients not only prohibit the use of 2. David S. Almeling, Darin W. Snyder, Michael
out of the Eastern District of Texas,6 the that employer cannot establish that it took such storage applications, but work with Sapoznikow, Whitney E. McCollum and Jill Weader, “A Statistical Analysis of Trade Secret Litigation in Federal
defendant, plaintiff’s former COO, utilized reasonable steps to protect its informa- their internal IT departments to disable the Courts,” 45 Gonzaga Law Review 291, 303 (2010).
Dropbox on the day of her resignation to tion and thus have it recognized as “trade ability of employees to utilize them. In addi- 3. Symantec Corporation, “What’s Yours is Mine: How
Employees are Putting Your Intellectual Property at
upload literally thousands of confiden- secrets” when forced to protect its rights in tion, where a client utilizes employer-based Risk,” at 1 (2013).
4. Ashland Management v. Janien, 82 N.Y.2d 395, 407
tial patient iles and other commercially court.8
cloud storage, the client must ensure that (1993) (quoting Restatement of Torts §757, comment b).
sensitive trade secret files. Fortunately Where clients often get into trouble is proper safeguards are being used to moni- 5. For those unfamiliar with the term, the “cloud” is
for that plaintiff, its former COO made an that they try to restrict too much or use a tor and track access, such as unique log-in best described as the use of a network of remote serv-
off-the-cuff comment to one of the plain- “one size its all” approach, both of which credentials for each employee.
ers hosted on the Internet to store, manage and process
tiff’s human resource employees that “she may subject the covenant to invalidation • Conspicuously designate conidential or data, as opposed to the use of a local server or a per-
sonal computer.
knew where too many bodies were bur- as overbroad or unnecessary to support a trade secret documents so that employees are 6. Frisco Medical Center, L.P. v. Bledsoe, 2015 U.S. Dist.
ied,” which led the employer to conduct a legitimate business purpose.9 If used cor- on clear notice as to how they should handle LEXIS 159915 (E.D. Tx. 2015).
detailed forensic investigation of the former rectly and tailored to the particular employee certain materials.
7. PrimePay v. Barnes, 2015 U.S. Dist LEXIS 65710 (E.D.
Mich. 2015).
COO’s computer equipment. Had no such and interest at stake (here, the protection • Implement policies to monitor and track 8. See Delta Filter v. Morin, 108 A.D.2d 991(3d Dept.
1985) (holding that in the absence of a nondisclosure
comment been made and no investigation against use and disclosure of trade secret an employee’s access to and use of trade agreement the plaintiff could not establish that the
conducted revealing the use of Dropbox, information), a non-competition or other secret information.
defendant used improper or wrongful means to obtain
there is no telling the amount of damage restrictive covenant can be one of the more • Prepare written trade secret protection plaintiff’s purported trade secret information); see also
that could have been done to this plaintiff’s effective tools in protecting against the theft policies for access to and use of company Starlight Limousine Serv. v. Cucinella, 275 A.D.2d 704 (2d Dept. 2000) (holding that information did not constitute
business.
or unauthorized use or disclosure of trade information. Such policies should, at the trade secrets where the company failed to require the
Similarly, in a case out of the Eastern secret information, particularly when coupled very least, be distributed to, and reviewed employee to execute any kind of agreement to keep the
District of Michigan,7 an employer came to with the additional deterrents of attorney and initialed by, any employee with access information secret or not use the information after leav-
ing employment).
learn that one of its former employees, at or fees and forensic cost shifting provisions. It to trade secrets.
9. See, e.g., Bdo Seidman v. Hirshberg, 93 N.Y.2d 382 (1999).
around the time of his resignation, upload- must be noted, however, that courts every- • Exit interviews. All clients should conduct 10. Bdo Seidman v. Hirshberg, 93 N.Y.2d 382 (1999);
ed myriad commercially sensitive iles to where—including New York—are increas- an exit interview of all departing employees Scott, Stackrow & Co., C.P.A’s, P.C. v. Skavina, 9 A.D.3d
Dropbox. The plaintiff there immediately ingly suspicious of restrictive covenants as and, as a part of each such interview, remind 805 (3d Dept. 2004); Gilman & Ciocia v. Randello, 55
brought an application for a preliminary a condition of employment, either initial or that employee in writing of his/her contrac- A.D.3d 871 (2d Dept. 2008); Brown & Brown v. John- son, 115 A.D.3d 162 (4th Dept. 2014), reversed on other
injunction seeking to prevent that former
continued; it is thus imperative that a client
tual and common law obligations with respect
grounds, 25 N.Y.3d 364 (2015).