Protecting Trade Secrets in Employment Contracts
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Why Should I Use Employment Contracts to Protect My Trade Secrets?
Most of the disputes over trade secrets are between employers and former employees. Employment contracts can limit the risk you take in disclosing valuable information, which may be a type of trade secret, to employees.
How Can I Use an Employment Contract to Protect My Trade Secrets?
There are a number of ways you can use an employment contract to protect your trade secrets. Some of the most common ways are:
- Nondisclosure Agreements - A nondisclosure agreement requires an employee to keep trade secrets secret. Generally, you have to be fairly specific about what information is a secret in order to get the maximum benefit from a nondisclosure agreement.
- Covenants Not To Compete - Covenants not to compete are promises that if the employee leaves the company, he cannot work for a competitor for a specified period of time. This can help ensure that the employee does not reveal your valuable trade secrets to a competitor. If you include a covenant not to compete in an employee contract, you should make sure that the covenant is reasonable. Courts will generally not enforce covenants not to compete if they impair the employee's ability to make a living. So, you should make sure that the covenant not to compete is not for an unreasonable period of time and is limited to your specific industry.
- Assignment of Invention Clauses - Although trade secret information generated by employees generally belongs to the company, you may want to include a clause in the employment contract that specifically states that ownership right.
- Trailer Clauses - Trailer clauses require employees to assign to the company any inventions or information developed after the employee leaves. This can prevent the employee from using the company's trade secrets to compete with the company. Generally, trailer clauses must restrict the assignments to only include inventions that result from the employee's job at the company.
- Regulations - You may want to include in the employment contract an explanation of trade secret regulations and the security measures that you have taken to protect your trade secrets. This will ensure that the employee understands what is expected of him during and after his employment.
Are All These Employment Contract Clauses Legal?
Typically, as long as the limitations you place on your employees are reasonable, they will be enforceable. In determining if the limitations are reasonable, look to the length of time the restriction will be placed on the employee, the effect it will have on his ability to make a living, and the overall fairness of the limitations.
Do I Need a Lawyer Experienced in Trade Secret Law?
If you are planning to use an employment contract to protect your trade secrets, you may want to consult a lawyer. An intellectual property lawyer will be able to help you draft a contract that protects your rights without infringing on the rights of your employee.
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Last Modified: 08-31-2015 04:12 PM PDT
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