Under Lock And Key

Employees know secrets their former bosses don't want them sharing.
Magazine Contributor
2 min read

This story appears in the July 2000 issue of Entrepreneur. Subscribe »

With so many workers job-hopping these days-especially in the high-tech and IT industries-it's inevitable that they take some trade secrets with them. "Once exposed to trade secrets, it's often difficult for an employee to purge them from memory when working in the same field for a new employer," says James Gatto, an intellectual property and technology lawyer for Hunton & Williams in Richmond, Virginia.

Nowadays, the passing of trade secrets has little to do with espionage. "What happens most frequently is someone is hired by an employer to work on the same kind of product or project that they've been working on for a competing company," Gatto says.

In the past, the burden of proving a trade secret was used by an ex-employee at a new company often fell to the prior employer. But that's changing: In some areas, it's new employers who must prove new employees aren't using trade secrets on a new product, project or service.

To avoid problems and potential liability, hiring companies should be wary when looking for employees. "You need to be extremely careful about targeting employees from one company-especially if it's a direct competitor," says Gatto. In other words, be careful about raiding a competitor's work force. Gatto offers tips for staying out of court: Advertise widely, avoid hiring only from competitors and allow an employee's former co-workers to approach you first.

To keep your information from walking out the door, perform exit interviews. Says Gatto, "This reminds employees of their confidential obligations and puts them on notice."

Next Step
  • For more details about trade-secrets laws, click over to www.rmarkhalligan.com and click on the link to "Trade Secrets." Run by R. Mark Halligan, chairperson of the American Bar Association's Committee on Trade Secrets, this online resource summarizes decisions, gives viewers a guided tour of trade-secret law and explains how to set up a trade-secret-protection program.

Ellen Paris is a Washington, DC, writer and former Forbes magazine staff writer.

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