Trade secret litigation is the hottest thing going in employment law today. In the corporate world, everybody who’s anybody has trade secrets to protect, and companies are increasingly vigilant about protecting their confidential information. Employees are routinely asked to sign confidentiality and nondisclosure agreements, and these agreements are often Exhibit A in lawsuits filed against departing individuals and their new employers.
These cases usually arise after a new employee is hired away, but as companies grow increasingly aggressive, the timeframe can be moved back. A controversy arose in 2000 when Intel accused Broadcom of conducting job interviews of Intel employees to get confidential information, changing the trade secret litigation landscape.
Trade secret cases usually start with an immediate battle for the upper hand: One or both parties requests injunctive relief from the court on the grounds that confidential information is in imminent danger and that the company needs protection while the case is pending. The prevailing party (if there is one) gains control of the litigation and is able to negotiate a settlement from a position of strength. Very few trade secret cases ever get to trial.
In the Intel case, a judge determined that Broadcom had attempted to extract trade secrets during job interviews with Intel employees, and granted a preliminary injunction against Broadcom. The case, filed in Superior Court in Santa Clara, California, touched a nerve in the Silicon Valley, where executives often probe job candidates about their current and future projects at competing firms.
The court determined that Broadcom’s endeavors "were clearly not employment interviews," and ordered Broadcom to undertake measures to prevent the future disclosure of the private information of competitors.
The case was ultimately settled. But the allegations highlight another facet of the new economic espionage: Without using restrictive covenants (which are unenforceable in some jurisdictions), you can’t stop your employees from going to your competitors. And as this example illustrates, the process of downloading information sometimes doesn’t wait until the employee is hired.
An unfortunate reality of our legal system is that anyone can file a baseless lawsuit. Disproving false allegations and prevailing in litigation is costly and burdensome. And so a natural question arises: How can a prospective employer avoid a trade secret violation during a job interview? And more importantly, how can a company protect itself from baseless allegations? The answer lies in carefully educating interviewers about confidentiality and trade secrets, and in expressly disavowing to the job candidate any interest in protected information.
Interviewers should be made aware of the type of information that can be protected. Under the Uniform Trade Secrets Act, which has been adopted by most state legislatures, trade secrets can be any type of information, process, idea or "know how" that is not generally known and gives the possessor an advantage in the marketplace.
By that definition, trade secrets include a wide range of confidential business or proprietary information, such as chemical formulas, industrial processes, business plans and, under certain circumstances, customer lists. In order to maintain business information as a trade secret, one must take reasonable precautions to prevent the information from becoming generally known to his or her competitors. "Reasonable precautions" usually include requiring employees to execute confidentiality and nondisclosure agreements in favor of the employer.
At the outset of the interview, the candidate should be warned not to share proprietary information gained from previous employment. The interviewer must be circumspect in his or her questioning. Common sense is an appropriate guide.
A general description of the interviewee’s job responsibilities and capabilities is fair game, but specifics of his or her accomplishments might include dangerous details. Interviews of salespeople can be especially perilous because even the identity of existing or prospective customers could be protected. Asking a candidate to list the customers with whom he or she regularly does business, or who could be brought over as new customers by the candidate, could lead to an accusation of wrongful conduct. Engineers may have worked on secret formulas, and executives may have participated in the preparation of business plans. In this era, virtually any employee may be in possession of confidential information.
During witness depositions, attorneys often avoid information protected by the attorney-client privilege by asking, "Did you discuss this document with anyone other than your lawyer?" A similar framework can be used in interview questions. "Without telling me anything about the actual formula for Pepsi, what is your role in developing new products for the company?" Cautious questioning can prevent inadvertent disclosure of confidential information.
In especially sensitive situations, it may be appropriate to ask the candidate--before the interview--to acknowledge in writing that he or she has been admonished to avoid discussing confidential or trade secret information. Should a claim arise, and the allegedly aggrieved party requests injunctive relief, a signed acknowledgment would make it very difficult for the plaintiff to obtain relief. This area, like many areas of employment law, is one where an ounce of prevention is very much worth a pound of cure.
Workforce Management, January 2005, pp. 12-13 -- Subscribe Now!