BFV Perspectives, BFV Videos, Noncompete & Trade Secrets, | Dec 17, 2018

Assessing the Risk of Trade Secret Theft by a Departing Employee

One of the ways in which companies can better protect their confidential information and trade secrets is to assess the level of risk of theft of that information by a departing employee.  Here are six factors to consider when assessing this risk: 

  1. The nature of the information to which the employee had access. One of the key factors in determining the risk of trade secret theft is whether the employee had access to confidential information or trade secrets.  It is critical to determine if a departing employee had access to proprietary information and, if so, what information he or she had access to.  If the information is of the type that could be used to compete unfairly, trade secret theft may be more likely to occur. 
  2. The employee’s role with the company. Another key factor in determining the risk of trade secret theft is the employee’s role in the company.  Someone departing from the research and development team is much more likely to be a threat to steal sensitive information than someone from the finance team.  Likewise, a sales person is much more likely to take information than a clerical employee.
  1. Whether the departure is voluntary. Is the departure voluntary or involuntary?  An employee whose employment has been terminated is probably unhappy.  A disgruntled employee likely poses a higher risk of trade secret theft than someone leaving voluntarily.
  1. Where the employee is going. Is the employee departing to become employed by a competitor?  If an employee is leaving to join a competitor, this naturally poses a much greater risk of trade secret theft than if someone is leaving to go into a different industry or line of work.
  1. Whether the employee is trustworthy. What is the level of trustworthiness of the employee?  Is the employee someone who has demonstrated honesty and integrity during his or her employment? Or, is he or she someone who has proven to be less than candid?  If the latter, the risk of theft of information is likely higher.
  1. Whether there is evidence that information has already been taken. Is there any evidence the employee has already taken information from the company even if it appears to have occurred in the “ordinary course of business”?  A simple review of a departing employee’s email may show if sensitive information has been emailed to a personal email address. Further investigation, including a forensic investigation of the departing employee’s computer may provide evidence of downloading of information to external storage devices and/or uploading to cloud storage services. If any of this type of evidence is present, the risk of the individual retaining confidential and/or trade secret information in his or her possession is high.

Once this risk has been assessed, if an individual represents a high risk of trade secret theft, additional steps should be taken to protect the company’s interests.  Those steps have been discussed in other entries on this blog. 

Finally, a complete review of the departing employee’s restrictive covenants, including non-compete, customer non-solicit, employee non-recruitment/solicitation and confidentiality should also be conducted as part of any employee departure, so the company can act quickly if the departing employee engages in unfair competition.

BFV Perspectives, BFV Videos, Noncompete & Trade Secrets, | Dec 17, 2018
Benjamin I. Fink
Benjamin I. Fink

Benjamin Fink is known for his work in noncompete, trade secret and competition-related disputes. A shareholder at Berman Fink Van Horn, Ben concentrates his practice in business and employment litigation.