Hiring Competitor’s Top Talent & Being Fiercely Competitive Without Exposing Your Company

1,460 views

Published on

On Wednesday, January 23, Knobbe Martens Partners Jeff Van Hoosear, Susan Natland, Diane Reed and Lynda Zadra-Symes participated in the Association of Corporate Counsel (ACC) - Southern California In-House Counsel Conference. This all day CLE program was just for in-house counsel and panels included: Social Media & Privacy; New Developments in California Employment Law; Lawful Interception; Millennial Engagement in the Workplace; and Helping Sales & Marketing Avoid Defamation/Unfair Competition.

Published in: Education
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,460
On SlideShare
0
From Embeds
0
Number of Embeds
477
Actions
Shares
0
Downloads
10
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Hiring Competitor’s Top Talent & Being Fiercely Competitive Without Exposing Your Company

  1. 1. Swimming With Piranhas: Hiring  Competitor’s  Top  Talent  &  Being  Fiercely   Competitive Without Exposing Your Company Avoiding Trade Secret Misappropriation, False Advertising & Unfair Competition Claims January 23, 2013 Los Angeles, California Moderator: Harrison Perla, Esq. Panelists: Lynda Zadra-Symes, Jeff Van Hoosear, Susan Natland and Diane Reed @KnobbeMartens at TwitterThe recipient may only view this work. No other right or license is granted. #IHCC12 #IHCC13 2013 ACC-SoCal In-House Counsel Conference
  2. 2. Via Federal ExpressDear President:I  am  General  Counsel  for  Fierce  Competitor,  LLC.  (“FCL”).    It  has  come  to  my  attention  that  your  company  has  recently  hired  Pat  O’Neil  Riley,  a  former  V.P.  of  Sales  and  &  Marketing  at  FCL.    Given  Pat’s  position  at  FCL,  Pat  had  access  to  a  variety  of  confidential  and proprietary information. Whatever Pat knows clearly qualifies as a TRADE SECRET of FCL andshould  not  be  used  by  your  company  …We demand that you cease and desist from the use and disclosure of all information and data that Patobtained  while  a  V.P.  at  FCL  …We further demand your immediate confirmation that your company will not use or disclose anyTRADE  SECRETS  or  proprietary  information  of  FCL  …Unless I have your immediate confirmation by the close of business yesterday, FCL will proceed toenforce all legal remedies available to it, including, false advertising, unfair competition, trade libel,as  well  as  all  other  remedies  that  our  outside  counsel  have  not  yet  even  thought  of  …I expect to hear from you by yesterday. Have a nice day.Sincerely, General Counsel 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_2 2
  3. 3. What is your next step? 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_3 3
  4. 4. Understanding Trade Secrets: Protection and MisappropriationTrade Secret DefinitionMarking ConfidentialNDAsAvoiding Liability 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_4 4
  5. 5. What is a Trade Secret?“Trade  secret”  is  a  legal  term  for  knowledge,  or   information that is confidential or secretAnother term that you may sometimes hear is “confidential”  or  “proprietary”  informationThese terms are more or less synonymous: – Trade secrets – Proprietary information – Confidential information 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_5 5
  6. 6. Laws governing the protection of trade secretsIn the U.S., the protection of trade secrets is governed by state lawTrade secret laws vary from state to stateThere is no U.S. or federal system for recognizing trade secretsSome foreign countries have laws to protect trade secrets, but those laws vary from country to country (so governing law is important)Some foreign countries do not even recognize trade secrets as a form of IP 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_6 6
  7. 7. What are the legal requirements to protect trade secrets?Generally, the law will recognize and protect a trade secret if it constitutes information that: – Is not generally known (i.e., it is secret or confidential) – Has value to you or would have value to a competitor – Is subject to reasonable efforts/procedures to preserve its confidentialityConversely, if the information is publicly available or otherwise falls into the public domain, it is not protectable as a trade secret 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_7 7
  8. 8. What kind of information can be protected?Almost anything!Business information – Financial data – Sales data – Customer or vendor data – Operational information – Branding information – Advertising and marketing data – Prospective products, services, or programs 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_8 8
  9. 9. What kind of information can be protected?Technical, engineering, testing or scientific information or dataComputer software and related documentationManufacturing processes or methodologiesRecipes, formulas or instructionsThe law tends to favor technical information over business information – so be especially careful with protecting business information to preserve its trade secret status 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_9 9
  10. 10. Do you need to file or register anything to protect a trade secret?There is no legal system for registration of a trade secretWhether information qualifies as a trade secret is based on a good faith belief that it meets the requirementsThere are important procedures for preserving a trade secret as a protectable assetIt is fairly easy to lose trade secret status 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_10 10
  11. 11. How do I protect a trade secret?The most important things to do: – TREAT THE INFORMATION IN A CONFIDENTIAL MANNER – Clearly label or designate the information as “confidential”  or  “proprietary” – Maintain the information in a locked or secure location that cannot be accessed without appropriate authorization – Limit access to the information only to those within the company who need to know it 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_11 11
  12. 12. How do I protect a trade secret?– Do not publish or distribute the information to the public– Use appropriate agreements with confidentiality clauses– Monitor or audit compliance on a regular basis to ensure (and demonstrate, if necessary) that the procedures to protect you trade secrets are in force and being followed– Treat your trade secrets and your NDAs as your other IP (status reports, etc.) 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_12 12
  13. 13. What if I need to share the information? Be sure to enter into an appropriate agreement requiring the recipient of the information to maintain the confidentiality of the information One type of common agreement is a Non-Disclosure Agreement  or  “NDA” There are several types for different situations, so be sure to consult legal counsel before signing an NDA or asking someone else to sign one The NDA should limit the purpose and use of confidential information The NDA should have a general IP assignment clause 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_13 13
  14. 14. NDAs and Other AgreementsAny  agreement  can  have  a  “confidentiality”  clause   to preserve the trade secret status of information exchanged pursuant to the agreementA few examples are: – Employee agreements – Consulting agreements – Development (R&D) agreements – Software development agreements – Manufacturing agreements – Vendor agreements – Supply agreements 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_14 14
  15. 15. How long do trade secrets last?Trade secret protection can last foreverDuration is unlimited as long as the information is kept secret – Coca-Cola (recipe) – KFC (recipe) – Google (algorithm) – The New York Times Bestseller List (algorithm)If the information is released to the public, even illegally, the trade secret will be lost 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_15 15
  16. 16. How can trade secret status be lost?Publishing articles or white papers containing the trade secret informationPosting the information on a website or in social mediaPresenting the information at a trade show or conferenceSpeaking to others outside the company about the informationSelling, distributing or presenting a product or sample that embodies the information (under certain circumstances) 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_16 16
  17. 17. What circumstances?The sale or distribution of a product from which the information can be discerned by reverse engineering will cause the information to lose trade secret status! – Reverse  engineering  of  competitor’s  products  is   often  conducted  as  routine  “competitive   intelligence”  by  many  companies – Several labs specialize in reverse engineering products to determine product composition, physical characteristics, and even how the product was made 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_17 17
  18. 18. Other ways to lose trade secret statusOther ways to lose trade secret status: – The information is developed independently by another party  The trade secret status may not be lost but you cannot enforce your trade secret rights against that party – The information is developed independently or discovered by another party and made available to the public  The information falls into the public domain and trade secret status is lost 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_18 18
  19. 19. Still other ways to lose trade secret statusBreach of an NDA or other confidentiality agreement – legal action may be available but the trade secret status is still lost – Even though there is an NDA, it is not a guarantee that the party receiving the trade secret will honor the confidentiality obligations of the agreement – Thus, disclosure of trade secrets under the protection of an NDA must be carefully evaluated, including the level of trust that is reposed in the receiving party 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_19 19
  20. 20. Losing Trade Secret ProtectionPublication DisclosurePresentation DisclosureInadvertent DisclosureSale or DistributionIndependent DevelopmentBreach of an NDAPatent by a Third Party 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_20 20
  21. 21. Because trade secret status can be easily lost . . .Serious consideration should be given at the outset to whether the information should be protected by trade secret, copyright, or patent (if available)Note that if you initially follow the trade secret route, patent protection is likely not available, copyright still possible 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_21 21
  22. 22. General Principles An Employee Can Take His or Her General Knowledge, Skill, Experience Cannot Take Anything Tangible Belonging to the Employer Cannot  Take  Anything  “confidential”  or  protected  as   a trade secret Contractual Limitations 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_22 22
  23. 23. Can I be at risk in violating the trade secret rights of others?Caution should be exercised in hiring employees from competitors – Be sure to consult legal counsel in sensitive situations – Avoid risk of charges that you hired an employee to gain  access  to  the  competitor’s  trade  secrets – Avoid  charges  that  you  “interfered”  with  a  competitor’s   contractual or customer relations – Have provision in employment agreement which confirms employee has no trade secrets or confidential information of prior employers 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_23 23
  24. 24. Can I be at risk in violating the trade secret rights of others?Even in NDA situations or other agreements, avoid receiving the confidential information of another party unless absolutely necessary to fulfill the purposes of the arrangementHave a clear policy and educate your team to respect the IP rights (including trade secrets) of others 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_24 24
  25. 25. Avoiding Liability for Misappropriation Hiring Sensitive Employees from Competitors Nothing Should be Taken from Prior Employer Do  Not  “Jump  the  Gun”  (review  hiring  and  start  dates)   Review  Calendar/Schedule  (track  employee’s  work   product) Document Independent Creation Conduct Independent Research to Find Customers, Vendors, etc. Consider  a  “Clean  Room”  Procedure 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_25 25
  26. 26. General Procedures and RecommendationsAdvertise for All PositionsDo Not Target a Particular IndividualPublish Policy Against MisappropriationSimilar Provision in Employee AgreementHave a New Project Underway Before Hiring any “Sensitive”  Employees  Avoid  Hiring  a  Number  of  Competitor’s  Employees   at the Same Time or Within a Short Time PeriodReview Insurance Policy 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_26 26
  27. 27. Insert Sponsor Logo Panelists here Moderator: – Harrison Perla, Esq.  Harrison Perla, Director of Worldwide Legal Affairs at CEVA, Inc.  @HarrisonEsquire on Twitter Presenters: – Susan M. Natland, Esq. – Diane M. Reed, Esq.  Partner at Knobbe Martens  Partner at Knobbe Martens  Susan.Natland@knobbe.com  Diane.Reed@knobbe.com – Lynda Zadra-Symes, Esq. – Jeff Van Hoosear, Esq.  Partner at Knobbe Martens  Partner at Knobbe Martens  Lynda.Zadra-Symes@knobbe.com  Jeff.VanHoosear@knobbe.com 2013 ACC-SoCal In-House Counsel Conference #IHCC13 090701_‹#› 090701_60 60
  28. 28. 9th Annual In-House Counsel Conference January 23, 2013 (Los Angeles, CA) www.acc.com/chapters/socal/ #IHCC13 @KnobbeMartens 61 000000_61

×