Trade Secrets

Of course, drawing up your non-compete agreements after your competitor has hired away a flock of employees is like locking the barn door after the horse gets out. Is there anything you can do to keep your company from being damaged? Maybe there is, under certain circumstances.

If hiring your employees means your competitor stands to gain confidential information about your business, you can sue to stop the leak. It might be trade secrets about your product or your organization, or it might be lists of cus-tomers. You have a legal right to protect confidential information that your competitors could use against you.

For instance, a plant manager at a bakery in Ellsworth, Iowa, quit to work for a competing bakery near Chicago. The Iowa bakery sued, charging that the employee could reveal, among other things, its secret for keeping bagels fresher longer. A court ordered the former plant manager to quit his new job and banned him from working for any competing company operating within 100 miles of any of his former employer's marketing outlets.

In another case, two employees of a California roofing-repair business left to form their own roofing business. Alarmed by the new business soliciting its former customers, their former employer sued, claiming that the collection of customer business cards that the two had taken with them comprised a trade secret because they represented nearly 80 percent of the employer's customer base. The court prohibited the use of the cards, awarded over $39,000 in damages, and permanently enjoined the new company from doing business with 32 customers who had been illegally solicited.

While courts are willing to protect confidential information, it only counts as such if you treat it as confidential. You can't leave business plans lying around in plain sight, publicize the names of your customers on your Web site and post your pricing structure on the Internet, then claim all those things are trade secrets.

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This article was originally published in the September 2000 print edition of Entrepreneur with the headline: RA-A-A-ID!.

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