Most companies have information that they believe is confidential and proprietary to their business. Information, which in the wrong hands, such as the hands of a competitor, could be used to cause financial harm to the Company.
That information can include such things as: customer lists (both active and prospective); the identity, authority and responsibilities of key contacts of customers; customers’ specifications and other characteristics; operations documents, manuals, processes and guidelines; costing and/or pricing policies and related information, including profit margins; marketing documents and plans; business strategies, techniques and methodologies, including information respecting suppliers; financial information, including information set forth in internal records, files and ledgers, or incorporated into profit and loss statements, fiscal reports and business plans; vendor and supplier information, including key contacts and pricing information, volume discounts and most favored customer pricing; inventions, discoveries, devices, algorithms, computer hardware and computer software, including, without limitation, any source code, object code, documentation, diagrams, flow charts, know-how or techniques associated with the development or use of the foregoing computer software and/or customization of same; information about or concerning Customers and information which the Customer has identified as confidential and/or proprietary; employee compensation and benefits; and any other information, which is not generally known to the Company’s competitors, including, without limitation, information constituting trade secrets under governing trade secrets law.
Pennsylvania’s Uniform Trade Secret Act defines “trade secret” broadly to include “information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that:(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy”.
In applying the Pennsylvania Trade Secrets Act the Courts of this Commonwealth have protected information such as that described in the first paragraph, provided that the company seeking protection has undertaken reasonable means to maintain the secrecy of the information/documents. In other words, you cannot just assert confidentiality of information or documents, you must ACT in accordance with the assertion to protect the information from inappropriate disclosure, use and/or dissemination.
There are several reasonable methods that Companies can use to protect its confidential/proprietary information and trade secrets. If stored in hard copy, confidential/proprietary information and trade secrets should be protected by storing the information in a locked office and in a locked file cabinet and only those personnel with a legitimate business need to know should be granted access. The number of keys issued should be carefully monitored, including key numbers, to whom issued and the dates issued. A log should be kept anytime access is given to anyone who does not have a key, including the date, time, identify of the person requesting access and the reason for the requested access. Better yet secure the information by a keypad that is password protected and electronically records all entries.
All confidential/proprietary information and trade secrets that are stored electronically must be password protected so that only those limited personnel with a legitimate business reason to know are granted access. Passwords of any employee to be terminated or who voluntarily resigns should be immediately deactivated.
The Company should also have confidentiality of information policies, either in their employee handbooks or as stand-alone policies, but in either event, every company employee and officer should be required to sign an acknowledgement that he/she received the policy, reviewed the policy, understands the policy and agrees to be bound by the policy. The policy should clearly state that violation of the policy will result in disciplinary action, up to and including termination of employment. All executed acknowledgements should be preserved in the personnel files.
Companies may also require employees and officers to sign non-use, non-disclosure agreements requiring the protection of identified confidential/proprietary information and trade secrets by the employee/director. These types of agreements are usually better received and generally enforced by the courts than are non-competition agreements as they do not deprive an employee of the opportunity to earn a living in the geographic area in which they reside. They simply prevent the employee/officer from doing so by using the protected information of the former employer.
In essence, the advice is simple. If you believe you have confidential/proprietary information and trade secrets that could cause financial harm to your business in the hands of a competitor than act reasonably to protect that information from inappropriate use and/or disclosure.
For further information, contact Kathleen Misturak- Gingrich, Esquire at 717.283.4963 (direct dial) or