Is a Client List a Trade Secret in Texas?

0e348adfa4295fa0fabe78ead1d69672--lawyer-humor-job-humorI’ve been contacted by many a business owner saying, “my employee left, he had a confidentiality agreement, and now he is contacting my customers on behalf of his new employer. Can I stop him?”. The answer to that question, of course, depends on several factors. One of them is whether the business owner’s client list qualifies as a “trade secret” in Texas. 

Under the Texas Uniform Trade Secrets Act (“TUTSA”), a “list of actual or potential customers or suppliers” of a company qualifies as a trade secret as long as: (1) its owner, i.e. the company, took reasonable measures to keep it secret and (2) the list has an economic value because it is not generally known and cannot be easily determined by another person. 

Thus, a client list is not automatically a trade secret. Instead, a company must establish certain things at the temporary injunction hearing in order to get a court order prohibiting a former employee from contacting its clients on the ground that its client list is a trade secret.  

Recently, a Texas Court of Appeals in Cooper Valves, LLC, et al. v. Valvetechnologies, Inc., dissolved an injunction that prohibited a former employee from “possessing, copying, selling, disclosing, or using” any information about his former employer’s 1800 customers listed on the exhibit attached to the injunction order. The employer in that case, submitted under seal a list of all of its customers and asked the court to order the former employee not to use any information about those customers in his new job. The list, however, included only the names of the companies, and not the names and contact information for the key decision-makers.  It also included many pre-existing customers of the former employee’s new employer.

The Court of Appeals voided the injunction finding that it was overboard and that the company did not prove that company names qualified for trade secret protection. Thus, the owner of the client list failed to prove that his particular client list, consisting of just the company names, was a trade secret. 

BOTTOM LINE: Business owners in Texas should make sure that they take reasonable measures to protect the secrecy of their client lists and, when push comes to shove and they must seek a court order preventing a former employee from using such a list in their new job, must be ready to establish the necessary requirements under the Texas law proving that the information contained in their client lists qualifies for trade secret protection. 

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries in federal and state courts. For a consultation regarding a dispute involving a noncompete agreement or misappropriation of trade secrets, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.

Texas Amends Its Trade Secrets Statute Effective September

good-wifeTexas Governor recently signed House Bill 1995, which amends Texas Uniform Trade Secrets Act (“TUTSA”) and aligns is with the Defend Trade Secrets Act (“DTSA”).

HB 1995 will go into effect on September 1, 2017 and will eliminate the difference between the TUTSA’s and DTSA’s definitions of “trade secrets,” removing an incentive to forum shop. Additionally, the statute will emphasize that the owner must take reasonable “measures,” and not just “efforts,” to protect its trade secrets. HB 1995 also introduces the following new definitions:

• “Owner” means, with respect to a trade secret, the person or entity in whom or in which rightful, legal, or equitable title to, or the right to enforce rights in, the trade secret is reposed.

• “Willful and malicious misappropriation,” means intentional misappropriation resulting from the conscious disregard of the rights of the owner of the trade secret.

• “Clear and convincing evidence” required to establish willful and malicious misappropriation is defined as the “measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established.”

Additionally, come September, Texas courts will have to apply a balancing test first articulated in  In re M-I, L.L.C., 505 S.W.3d 569 (Tex. 2016) when determining whether a party involved in a trade secrets lawsuit can be denied access to documents or testimony about its competitor’s trade secrets.  TUTSA codified this test as follows:

a presumption exists that a party is allowed to participate and assist counsel in the presentation of the party’s case. At any stage of the action, the court may exclude a party and the party’s representative or limit a party’s access to the alleged trade secret of another party if other countervailing interests overcome the presumption. In making this determination, the court must conduct a balancing test that considers:

•  the value of an owner’s alleged trade secret;
• the degree of competitive harm an owner would suffer from the dissemination of the owner’s alleged trade secret to the other party;
• whether the owner is alleging that the other party is already in possession of the alleged trade secret;
• whether a party’s representative acts as a competitive decision maker;
• the degree to which a party’s defense would be impaired by limiting that party’s access to the alleged trade secret;
• whether a party or a party’s representative possesses specialized expertise that would not be available to a party’s outside expert; and
• the stage of the action.

Bottom Line: In light of these new amendments, companies involved in trade secrets disputes in Texas will have to strategize early on – even pre-litigation – not only about proving their claims and defenses but also about protecting their trade secrets during the lawsuit and gathering evidence necessary to obtain attorney’s fees related to the trade secrets misappropriation claim.

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries in federal and state courts. If you are a party to a dispute involving a noncompete agreement or misappropriation of trade secrets, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108

 

Why Trade Secrets Protection is Even More Important in the Strong Economy

downloadIt is a well-known fact that when the economy improves, employee mobility rises as well. The most valuable employees – those with a specialized skill set and many years of experience in a particular industry – tend to stay within that industry while moving among competitors. Since such employees are usually given access to confidential information as part of their job duties, their move to a rival company often raises a concern of whether they will be sharing that information with their new employer. 

As 2016 was drawing to a close, a number of nationally known companies filed lawsuits to prevent their former employees from working for their competitors and/or sharing their confidential information. In December, Carolina Herrera sued Oscar De La Renta for hiring Herrera’s former Senior VP of Design despite her 6-month non-compete with Herrera. In January, Aria sued its Las Vegas rival, Cosmopolitan, and a former executive, alleging that she took confidential information about Aria’s high-roller clients in order to solicit them for Cosmopolitan. Earlier that month, Zynga, a mobile app gaming power house and creator of Farmville, sued two of its former employees for allegedly taking 14,000 files related to a new game Zynga was developing before going to work for its competitor. These are just a few examples that have received attention in the media.  In reality, similar situations develop all over the country on a daily basis.

In short, in the current market, any successful business, regardless of its size or industry, may be subject to trade secret theft not from foreign entities, but from its own departing employees. To prevent theft, or minimize the inherent damage that it carries with it, companies must have a process in place for protection of trade secrets and a plan of action for when theft is detected.

I have previously written about the simple steps any company can take to protect its trade secrets. In addition to these preventative steps, companies should be prepared to act quickly if a trade secrets theft is detected or suspected as time is of the essence, and not only from the practical standpoint of preventing dissemination of trade secrets, but from the legal standpoint as well. The more time passes between a company’s discovery of trade secret theft and any legal action, the less likely is the company to obtain an order from the court prohibiting the thief from using or disseminating the information.  Thus, being prepared to act quickly and having the resources to do so, can make e a difference in the company’s ability to stop the thief from sharing its confidential information with others.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Non-Compete and Confidentiality Issues to Watch in 2017

Non-Compete Issues to WatchIn 2016, there have been some major developments involving confidentiality and non-compete agreements law, which are likely to have some repercussions in 2017. Here’s a summary of the most important issues that companies should be aware of going into the new year.

1. The Federal Defend Trade Secrets Act.  This statute, enacted in May 2016, creates a federal question jurisdiction for misappropriation of trade secrets, allows companies to seize their trade secrets out of the hands of competitors in some circumstances, and provides whistleblower protection to employees when certain conditions are met.  In 2017, as companies begin to take advantage of the statute, the courts will begin creating a new body of law interpreting its provisions.

2. SEC Enforcement. The SEC will continue to go after the companies whose confidentiality agreements and policies they may find to violate the SEC’s whistleblowing rules.  Making sure that confidentiality agreements include the language specified in the federal Defend Trade Secrets Act may help with SEC’s scrutiny.

3. Choice of Law Issues.  Choice of law issues in interstate non-compete and confidentiality disputes will continue to be of major concern to companies who have out-of-state employees. A number of states in 2016 passed statutes dramatically limiting non-competes and California passed a statute that prohibits application of other states’ laws to its employees’ non-compete agreements. Business owners should make sure that their non-competes are enforceable in the jurisdictions in which they intend to enforce them.

4. Disclosure of Trade Secrets During Litigation.  This will continue to be a major point of dispute in trade secrets and non-compete lawsuits. For example, earlier this year, the Texas Supreme Court addressed what a trial judge must consider before allowing a competitor’s corporate representative in the courtroom during the testimony that might reveal the adverse party’s trade secrets. Thus, in 2017, those companies that are engaged in trade secrets misappropriation litigation in Texas will need to consider how this balancing test will apply in their particular circumstances. Many other states’ courts faced a similar issue in 2016 and have fashioned their own rules regarding when the disclosure of trade secrets in litigation is appropriate. 

TexasBarToday_TopTen_Badge_VectorGraphicLeiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Common Ways Businesses Leak Trade Secrets Without Their Knowledge

bookkeeping-online-sofware-computer-tablet-phoneIf you have a business, you have trade secrets. It is really that simple. In Texas, any information can be a trade secret as long as (1) it has economic value because it is not generally known and (2) the owner of the information has used reasonable efforts to keep it secret. Customer lists, pricing and discounts, manufacturing designs, financial data, food recipes – are all common examples of trade secrets.  However, virtually any information that meets the above two criteria can be classified as a trade secret in Texas.

When a trade secret information is stolen by a competitor or a former employee, the owner can seek injunctive and monetary compensation in court.  To get that, however, he will have to show that the information that was stolen is, indeed, a trade secret, i.e. that it has economic value and that he has used reasonable efforts to keep it secret. Unfortunately, many business owners do not realize what their trade secrets are until they are taken, unwittingly exposing such information to the public and destroying its trade secret status. Here are some common ways that companies are unknowingly sharing their trade secrets causing them to lose protection under the Texas Uniform Trade Secrets Act: 

Company Websites.  Many companies will post their customer lists and customer endorsements or recommendations on their websites to help attract other customers. Some companies also provide their pricing, rebates or discount information on their websites as well. While this may be very useful in attracting new clients, once such information is posted on a website, it loses its trade secret status.

Social Media.  Information shared on social media is not considered to be confidential or secret. Sometimes, companies will share their customer names or even pricing information on social media to attract a wider customer base.  Other times, company employees will share such information on their personal social media.  In either case, putting information out into the public domain means that the owner of the information probably will not be able to pursue a legal claim against anyone who decides to use such information.

Vendor and Third-Party Contracts. Even those companies that have non-disclosure agreements with employees often fail to include such restraints in their contracts with vendors and other third parties, which means that any information shared with such parties may lose its trade secret protection.

Public Filings. Unless filed under seal, any documents filed in court are open to the public, which means anyone can get a copy.  A business that voluntarily files documents containing trade secrets with the court may make the confidential information lose its trade secret status.  For example, filing a client contract in a collections lawsuit without redacting the pricing information will waive the confidential nature of that information.

Conclusion: The first step in avoiding an unwitting disclosure of trade secrets is taking stock of all information that your business has that might be a trade secret and implementing the processes and measures that would be considered reasonable to preserve the confidentiality of such trade secrets. When in doubt, consult with an attorney to conduct an audit of trade secrets at your company and devise the proper protection procedures. 

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

A Former VP of Operations Ordered to Pay $1.9 Million for Taking Company’s Trade Secrets in Violation of a Separation Agreement

Toshiba_HDTD105XK3D1_BLACK_LAPTOPAccording to some studies, more than 60% of employees copy their employers’ documents or files before leaving their employment. They are even more likely to do so if they had been laid off, fired, or passed over for promotion. With senior executives who have access to top level confidential information, such actions can cause irreparable damage to their former companies.

In 2015, Cheasapeake Energy Corp. sued its former CEO and co-founder for emailing himself highly sensitive information and instructing his assistant to print confidential maps after he resigned due to a public falling out with the company.  The year before that, Lyft sued its former COO for transferring to himself thousands of Lyft’s files before joining its arch-rival Uber.  The former COO apparently left Lyft after unsuccessfully pursuing the CEO position. 

A similar drama played out last year in Texas and it involved a VP of Operations of a publicly traded Houston company.  According to Ginn v. NCI Building Systems, Inc., Ginn had been working for NCI for 20 years when he was told that his position of Executive VP of Operations was being eliminated.  The company offered him a separation agreement, which stated that he was resigning on his own accord and imposed a 5-year non-compete, non-solicitation and non-disclosure covenants. In return, NCI immediately vested all of his unvested stock that he had earned over the years – about $1.5 million – and retained him as a consultant for 1-year with a $300+K salary. 

According to the Court of Appeals, while consulting for NCI, the VP began to plan a competing company. Once his consulting gig with NCI expired, he began competing with it. NCI filed a lawsuit alleging violation of a non-compete and non-disclosure covenants, fraud, breach of fiduciary duties, and a few other claims. Two years into the suit, NCI discovered that the night before the VP signed the separation agreement representing that he had returned all of NCI confidential information, he had actually downloaded more than 18,000 files on his private hard drive. The jury found, and the Court of Appeals upheld, that the VP made knowing representations to NCI on which NCI relied in giving him $1.5 worth of stock, thus, committing fraud.

In its lawsuit, NCI asked for a legal remedy called “rescission,” which is meant to put the parties into a position they were in prior to entering into an agreement. Here, NCI asked that the VP return the consideration that the company paid to him in return for his promises, i.e. his salary and the vested stock.  Since he no longer owned the stock, NCI asked that he pay the value of such stock of $1.5+M.  The First Texas Court of Appeals found such compensation legally appropriate and upheld the trial court’s order requiring the VP to pay NCI the compensation he had received. 

Takeaways: There a certain behavioral triggers that cause high-level employees or employees with access to large swaths of confidential information to take or share that information with a competitor.  A company should have a red-flag alert system that notifies them of the increased risk and allows them to take preventative measures before a disgruntled employee downloads or shares the company’s trade secrets with the outside world.  Demotions, denial of a promotion, increased complaints to a supervisor, inadequate bonus, etc., may all serve as triggers for trade secret theft.  Having a system, a checklist, and a designated person who monitors the situation around the company can go a long way in protecting the company secrets. 

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

9 Basic Steps For Minizing Trade Secrets Theft From Your Company

ArtCaption_DataExplosionLawsuits involving trade secrets theft have become an almost weekly occurrence. In 2015, Fitbit, Nike, Angie’s List, and Oculus Rift became entangled in high-profile legal battles arising out of former employees and competitors allegedly stealing the companies’ trade secrets such as customer lists, software codes, and design patterns. 

Considering the technological progress, with each passing year, more confidential information is stored, shared, and transmitted electronically.  At the same time, the number of devices that employees can use to easily and quickly copy and transmit such information is also increasing every year.  Given these parallel trends, those companies who have not taken stock of their trade secrets and implemented measures to protect them, are extremely vulnerable to having such secrets stolen by disgruntled employees or aggressive competitors, resulting in an irreversible loss of competitive advantage. 

There are simple steps that any business – small or large – can take to minimize the risk of trade secret theft. Here is short list of basic precautions that any company should be undertaking. 

  1. Figure out what trade secrets your business has. What gives you a competitive advantage? Is it a list of repeat customers? Pricing formula? Design patterns? Procedures that your company follows? Business plans? Product development plans? If this information is not publicly available, it most likely qualifies as a trade secret. 
  2. Who has access to your trade secrets? Can all of your employees access the information or is access limited only to key employees or on a “need to know” basis? The less people have access to your trade secrets, the better. 
  3. What systems do you have in place to limit access to trade secrets? Is the information password-protected? Do you have a way of keeping track of who accessed it, when, and for what purpose? Can you lock people out if you discover a security breach? Do you have alarms set for when somebody downloads a large amount of information or uses a personal device to access it?  Do you limit physical access via locked doors, thumb-print access or other security measures? 
  4. Do you have a confidentiality policy? Does your employment handbook include a confidentiality policy? Do all of your employees sign the policy? 
  5. Do you provide confidentiality training? If you have a large company, make confidentiality training part of your on-boarding process. If you run a smaller business, explain to employees what you consider confidential business information and how your expect them to treat it. 
  6. Do your employees sign non-disclosure agreements? If not, 2016 should be the year when all of your employees who work with confidential information sign enforceable Non-Disclosure Agreements (NDA).
  7. Do your vendors, suppliers, joint venture partners, etc., sign non-disclosure agreements?  Anybody – and I mean anybody – with whom your company either does business or plans on doing business – who gets access to your company’s confidential information, should  be signing a NDA before such information is shared with them. 
  8. When employees leave, do they sign a document stating they’ve complied with the NDA? All key employees should have an exit interview, during which they should reaffirm that they are aware of the NDA obligations and they have complied and intend to comply with them.  If an employee refuses to sign such a document, a forensic analysis of his or her devices might be necessary. 
  9. Do you back up devices of the key employees after they leave?  For key employees, before recycling their laptops, blackberries, etc. to be used by others, image those devices so that any evidence of confidential information being copied, transmitted or emailed outside the company is preserved for future investigation and, if necessary, litigation. 

Make 2016 the year that you proof your business against trade secret theft and ensure that it doesn’t fall victim to unscrupulous employees or unfair competition practices from business rivals.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

 

No Non-Compete Agreement? No Problem! – What Texas Companies Can Learn from Oculus Rift Lawsuits

kkI advise all my business clients in Texas to have non-compete and non-solicitation agreements with their key employees. Why? Well, first of all, because Texas courts enforce such agreements, so it only makes sense to take advantage of them. Second, because clear, specific, and reasonable non-compete and non-solicitation restrictions are usually a fair trade for providing key employees with access to customer lists, confidential information or expensive specialized training.

However, what happens if an employee does not have a non-compete? Does that mean that he or she can set up a competing shop across the street with no repercussions from the former employer? Well, not exactly. One only has to take a look at a few recent high-profile cases out of California courts to see that employers have many other ways to prevent employees from taking their confidential information and opening a competing business.  Since California does not allow non-competes, its employers have spent years perfecting other remedies to prevent unscrupulous employees from misappropriating their trade secrets. So, while Texas hates to look to California for, pretty much, anything, and while Texas and California law often diverge significantly, on this specific issue it pays to take note of what California companies have been cooking in their own courts.

Most recent example of an employer v. former employee battle waged in California-land that did not involve a non-compete agreement is a lawsuit by Total Recall Technologies (TRT) against Oculus Rift – a company that manufactures virtual 3D-reality headsets for gaming – and its founder, Palmer Luckey.  TRT filed a complaint in a federal court in California alleging a breach of non-disclosure agreement and “wrongful exploitation and conversion of plaintiff’s intellectual and personal property in connection with TRT’s development of affordable, immersive, virtual reality technology” by Luckey and Oculus Rift.  TRT alleged that Luckey was hired in 2011 to help develop a prototype head-mounted display, and as part of his job, he received information and feedback to modify the design.  According to TRT, Luckey used this confidential information to create Oculus Rift, his own version of the head-mounted display, which he launched via Kickstarter.  The lawsuit demands both punitive and compensatory damages in an unspecified amount. Given that Oculus Rift has recently been acquired by Facebook for $2 billion, the timing of this lawsuit could not be better for the plaintiff.

This is not the first time that Oculus Rift and its founder are being sued for alleged misappropriation of trade secrets. In 2014, ZeniMaxIP sued the same defendants in the U.S. District Court for the Northern District of Texas alleging that Occulus Rift breached its non-disclosure agreement with ZeniMax and, among other things, hired ZeniMax’s employees knowing that they would inevitably disclose ZeniMax’s trade secrets. Other claims included copyright infringement, unfair competition, trademark infringement, unjust enrichment, and false designation under the Lanham Act.

Notably absent from the suits were statutory claims for misappropriation of trade secrets.  The claim was not included in the ZeniMax v. Oculus lawsuit because Texas Uniform Trade Secrets Act (TUTSA), which governs such claims now, did not apply to misappropriations that occurred prior to September 1, 2013 – its effective date.  Why TRT did not plead a claim under the California Uniform Trade Secrets Act (CUTSA) is less clear, but just like TUTSA such claim is often plead in many employer v. former employee lawsuits in California.

Takeaway:  Just because a former employee never signed a non-compete or a non-solicitation agreement, does not mean that he or she can set up a competing business by using the trade secrets of its former employer. In Texas, TUTSA allows employers to go after employees who misappropriated their trade secrets (even in absence of non-compete or non-solicitation restraints) or where there is a threat of misappropriation. Moreover, a lot of times, a good non-disclosure agreement will give grounds to other claims. So, although having a non-compete or a non-solicitation clause in an employment agreement makes it easier for an employer to stop a departing employee from using its confidential information, all is not lost if no such restraints have been put in place.

Leiza litigates non-compete and trade secrets lawsuits on behalf of EMPLOYERS and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need advice regarding your non-compete agreement, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@GodwinLewis.com or (214) 939-4458.

10 Tips on Preventing Trade Secrets Theft by Employees Who Work from Home

workfrom homeIn 2013, Marissa Mayer’s memo to Yahoo employees cancelling Yahoo’s work-from-home policy sparked a debate on whether working from home hurts or benefits companies, and whether any cost-savings associated with such an arrangement are outweighed by a decrease in productivity of remote employees. Very few critics, however, discussed the added risks of trade secrets theft by remote employees.  It seems that many companies put a lot of emphasis on in-the-office security measures, but apply a much laxer set of rules to those who work from home. Because of that approach, the work-from-home arrangements often become the Achilles heel of the companies’ security measures.

Here are 10 tips on how to eliminate, or at least reduce, the risk of trade secrets theft by remote employees:

1. Do Not Allow Employees with Access to Highly Sensitive Information to Work from Home. While almost every employee would prefer to work from the comfort of their home, when a high-level employee has access to a highly sensitive information, working from home should not be an option.  The risk of somebody duplicating or downloading the company’s proprietary information at their “home office” is much higher than in the regular workplace. So, have your key employees come in the office if they are going to handle your top-level proprietary information.

2. Have Remote Employees Sign Confidentiality and Non-Disclosure Policies.  If a company allows its employees with access to less sensitive but still confidential information to work from home, it should require employees to execute a non-disclosure and confidentiality policy that describes what types of information the company considers confidential and what repercussions the employees will face if they violate the policy.

3. Have Log-In Reminders Emphasizing Confidentiality.  If employees are required to log into a proprietary software or a program that contains the company’s proprietary data, have the software vendor create a pop-window that reminds the employees when they log in that they are accessing confidential information.  This acts as a constant reminder to the employees that the data they are accessing does not belong to them.

4. Allow Remote Employees to Work Only on Company-Issued Computers.  There is no question that allowing employees to do work from home on their own laptops, saves companies on the costs of purchasing, maintaining, and upgrading the equipment. However, those savings can be easily dwarfed by legal costs should an employer want to examine an employee’s personal computer for evidence of trade secrets theft. When an employee uses a company-owned laptop, the company can easily retrieve it from the employee upon request.  However, when an employee uses his or her personal device, the company’s road to retrieval of its data from that device becomes much thornier (and much more expensive).

5. Have A Remote-Wipe or Lock-Out Measures. This is a no-brainer and is a must for every company that allows employees to work remotely. A company’s IT department should be able to quickly terminate any remote employee’s access to proprietary information. It should also be able to wipe the company’s confidential information from the employees’ devices, when appropriate.

6. Control Access to Confidential Information. Not every remote employee needs to access every software program or every database that a company has.  Determine which employees need access to what types of programs or data, and keep track of that information as part of their personnel file.  When such employees are terminated, the company should have a clear idea of what they had access to and what they could have potentially taken with them. This is especially important for employees who have non-compete or non-solicitation agreements.

7. Monitor What Accounts, Programs, or Devices Are Used by Remote Employees. Whether a company is using a cloud-based sharing system, VPN, or is allowing its employees to log into particular databases online, somebody at the company should monitor the use and flag any suspicious activity. The level and frequency of monitoring will depend on the size of the business, the type of the confidential data, and the manner in which such data is kept.

8. Set Up Red Flag Alerts, if Possible.  A company should work with its IT department and software vendors to determine if they can set up alerts that would notify the company when somebody downloads or copies an unusually large amount of data, prints an unusually large number of documents, or deletes a large amount of information from the company’s system.

9.  Have A System in Place for When You Need to Recover Company-Issued Computers. Figure out ahead of time whether, upon a remote employee’s termination, the company will be sending somebody to their house to collect company equipment or will be requiring them to return the equipment themselves. Whatever the system is, getting company equipment quickly after an employee’s termination, should be a priority.

10.  Plan Ahead Before Terminating a Remote Employee. There is a reason why a fired employee is usually walked out of the office right away. Being upset about getting fired may cause some employees to destroy company property or take it with them as a way of payback to the employer.  This is even a bigger concern for remote employees, as there is a time gap between them receiving a termination notice and a company being able to get its equipment back. Therefore, it is crucial for a company to be able to terminate remote employees’ access to sensitive information swiftly, instruct them clearly on how to return the company’s equipment, and follow-up with enforcement if an employee fails to follow the instructions.

Some of the above measures are cheap and easy to implement (e.g., written policies).  Others, require assistance of an IT person or a department or a purchase of a costly monitoring software.  It is up to each company to determine whether the confidential information that their remote employees work with justifies the cost of implementing the above measures.  However, every company that has employees that work from home, should at least analyze its weak spots with respect to its proprietary information, and determine how it can reduce the potential of data and trade secrets theft by remote workers.

If you suspect that your business’s trade secrets have been misappropriated or you are looking to implement measures within your organization that will prevent or minimize the chances of trade secrets being misappropriated, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108.

Four Ways to Protect Your Business Ideas: Patents, Trademarks, Copyright, and Trade Secrets

pictureWhether you are an owner of an established business or a budding entrepreneur working on a start-up, understanding how you can protect your business ideas is key to making your company attractive to investors, securing funding, growing the company and ensuring the longevity of your business.

Depending on the type of idea that you have, the state of the idea, and the amount of money at your disposal, you have the following four ways to protect your intellectual property:

1. PATENTS.   There are three types of patents in the U.S.: utility patents (90% of all patents); design patents, and plant patents. Having a patent for an invention or a design allows the owner to exclude others from making, using, or selling the invention or design for a certain period of time.  To obtain a patent, a person must file an application with the U.S. Patent and Trademark Office (USPTO).

Utility patent may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof.  Approximately 90% of the patent documents issued by the USPTO in recent years have been utility patents, also referred to as “patents for invention.”  Utility patents last up to 20 years from the date of patent application.

Design patent may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture.  In general, a design patent is obtained for the aesthetically appealing features of a product. It gives the owner the right to prevent others from making, using, or selling a product that so resembles the patented product that an “ordinary observer” might purchase the infringing article, thinking it was the patented product.  An example of a famous design patent is Coca-Cola’s unique bottle shape. Also, many clothing companies often patent a unique design to prevent other companies from imitating it.  Design patents last for up to 14 years from the date of the grant.

In many circumstances, one may obtain a design patent in addition to a utility patent for the same invention. Also, to the extent that the subject qualifies as a work of art, there may be an opportunity to obtain a copyright for the same, and if the design is embodied in a physical article, and also functions as a trademark, a trademark registration may be obtained.

Plant patent may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.

The patent application process is complicated and can cost thousands of dollars as most applications require help from a qualified patent attorney or agent.  To maintain the force of the patent, you must pay fees due at 3.5, 7.5 and 11.5 years after the patent grant.  The total amount of maintenance fees for a small entity (such as an independent inventor) is $4,430, while bigger entities must pay $8,860.

2. COPYRIGHT. Copyright protects original works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed.  You do not have to register your work to have copyright protection.  However, only registered works may be eligible for statutory damages and attorney’s fees in a copyright infringement suit. Thus, you should register your work with the U.S. Copyright Office, which can be done online for just $35 – $55 fee.

The term of copyright for a particular work depends on several factors, including whether it has been published, and, if so, the date of first publication. As a general rule, for works created after January 1, 1978, copyright protection lasts for the life of the author plus an additional 70 years. For an anonymous work, a pseudonymous work, or a work made for hire, the copyright endures for a term of 95 years from the year of its first publication or a term of 120 years from the year of its creation, whichever expires first.

3. TRADEMARKS. A trademark is a word, phrase, or design that distinguishes the source of the goods of one business from its competitors.  A right in a trademark is acquired by use, but registration with U.S. Patent and Trademark Office (USPTO) makes it easier to enforce such right.

To apply, you must have a clear representation of the mark, as well as an identification of the class of goods or services to which the mark will apply.  You can submit an online application, and filing fees vary according to the type and the number of classes of goods or services, among other factors. Filing an application for trademark is complicated, so, as with patents, most people hire attorneys who specialize in trademarks to handle the process.

4. TRADE SECRETS. Trade secrets in Texas are protected by the Texas Uniform Trade Secrets Act (TUTSA).  A Texas business or a person may claim as a trade secret any information that (1) has economic value because it is not generally known and (2) is subject to efforts to maintain its secrecy that are reasonable under circumstances. Trade secrets may include, but are not limited to the following: formula, pattern, compilation, program, device, method, technique, process, financial data or list of actual or potential customers or suppliers.

Thus, even those ideas and business processes that do not qualify for patents, copyright or trademark protection, can be protected by the owner as trade secrets, as long as they have economic value and the owner’s efforts to keep the ideas secret are reasonable under circumstances.

Under TUTSA, Texas business owners may also seek a temporary injunction to prevent misappropriation or threatened misappropriation of their trade secrets. A temporary injunction is a court order, which, if granted, prevents a person or a company from using the information claimed to be a trade secret.  Sometime, injunctive relief is the only way to protect valuable information from being stolen or misused by a competitor, but the owner must act fast after discovering misappropriation or a court might decide that the misappropriated information is not as valuable as the owner claims.

For more information about Texas trade secrets law, please click here.  If you suspect that your business’s trade secrets have been misappropriated or you are looking to implement measures within your organization that will prevent or minimize the chances of trade secrets being misappropriated, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@GodwinLewis.com or (214) 939-4458.