Put A Lid On It

Businesses of all sizes and in all industries should have reason to worry because every company has information that differentiates it in the marketplace, that provides not only a competitive advantage, but other benefits, too. A company's internal knowledge can mean the difference in whether its products sell, whether it gets a reputation for being innovative and whether it gains respect. It can also impact the bottom line: A 1998 American Society for Industrial Security and PricewaterhouseCoopers joint study estimates companies suffered $45 billion in losses over a 17-month period as a result of privileged information leaving the company walls. The survey also concluded that companies see employees as the main threat to their proprietary information.

Privileged information is compromised every day while doing business. It's virtually unavoidable. To combat the potential damage, many companies require employees to sign "nondisclosure" agreements, or NDAs, which limit employees from disclosing to third parties information that isn't already in the public domain. But that falls short, especially when you factor in human nature and modern technology, according to intellectual property law expert Michael Epstein, a partner with New York City-based law firm Weil, Gotshal & Manges LLP. "A nondisclosure agreement isn't enough. You have to sit down and say, 'Here's how I want you to use technology in public places,' " he says. Plus, Fine says, while NDAs require employees to keep quiet, they often don't tell employees how to make it happen, such as explaining how they should conduct conversations or offering guidelines for the proper use of laptops and cell phones outside the office.

This article was originally published in the December 2000 print edition of Entrepreneur with the headline: Put A Lid On It.