Intellectual Property

How Can Your Business Prevent Employees From Taking Its Intellectual Property?

By Brian Farkas, Attorney
How can you prevent theft of your company's IP?

Businesses have all sorts of intellectual property (IP). Your IP might include your company's logo, confidential production process for machinery, or perhaps proprietary software. Employees ordinarily have access to much, if not all, of a company's IP. Given this, how can you ensure that your employees do not misappropriate that information, either using it themselves or selling it to competitors? Obviously, all business owners hope that employees will not abuse their positions of trust. But the reality is that businesses must nevertheless take steps to protect themselves.

Discuss Confidentiality Explicitly and Share Information Selectively

Before considering legal means of protecting IP, business owners should first exercise common sense. If you want certain information to remain confidential, you need to communicate this expectation explicitly to your employees. Not all of your employees will have worked in environments that require a degree of discretion.

How can you communicate your expectations?

First, consider the orientation that you give to your new employees. Be sure to explain your expectation for discretion, particularly with respect to any specific information or technology. Second, consider the information contained in employee handbooks. Make sure your handbook includes information about your company's requirements for confidentiality so that there can be no mistake. Third, consider what ongoing training programs or refreshers that you schedule throughout the year (for instance, guest speakers on corporate espionage, cybersecurity, and so forth).

To the extent that the disclosure of confidential information can stem from misunderstanding by your employees, rather than malice, you can address at least some of these problems through robust communication.

Another commonsense tip: Not every employee in your company necessarily needs access to every bit of sensitive intellectual property. Consider ways to strategically limit sharing proprietary information with only those employees who genuinely need the information in order to perform their jobs. This practice of internal confidentiality can minimize your risk.

Register Your Business's Intellectual Property Whenever Possible

IP can be protected from infringement by employees, or any other third parties. However, each type of IP is protected in somewhat different ways.

Copyright gives creators of original works certain exclusive rights over those works, including the exclusive right to reproduce, perform, or distribute the work. Copyright could protect your business's website, marketing materials, internal brochures, artwork, or virtually any other original written or pictorial content. Under the Copyright Act of 1976, when these exclusive rights are infringed, the copyright holder can file a lawsuit seeking money damages among other remedies.

Although you are not required to register copyrighted materials, registration with the U.S. Copyright Office will provide a variety of protections, including the ability to sue in federal court. You do not necessarily need an attorney to register a copyright; the Copyright Office's website provides a simple online guide for registration of different types of materials.

Trademark protects words, logos, or other identifiers of the source of goods or services. Common examples would include the word mark "Google" as well as the multi-colored Google logo. Both indicate the corporate source of a particular product. While it is not legally required that you register your trademark with the U.S. Patent and Trademark Office (USPTO), doing so has many benefits.

First, trademark registration allows your business to scare away competitors, including employees who may seek to use your mark themselves. Second, it will give your mark the presumption of validity nationwide, rather than just in your local geographic area. Third, registration can make a trademark infringement lawsuit more likely to succeed and allow you to collect damages based on the Lanham Act. The USPTO makes trademark registration fairly self explanatory in most instances. Indeed, the agency's comprehensive roadmap to registration will help guide you. You can even fill out the trademark application on the USPTO website.

Patents give inventors the exclusive right to create or use a particular invention. A patent is a grant by the USPTO that allows the patent owner to maintain a monopoly for a limited period of time on the use and development of an invention. Patent protection can last for up to 20 years (depending on the type of patent). Generally, patents are more difficult, expensive and time-consuming to obtain than copyrights or trademarks. Indeed, it can take an average of two years to obtain a patent. For this reason, you should consult with your attorney about whether doing so makes sense for your particular business. The USPTO offers a helpful guide to the patent application process.

If an employee infringes on any of these three forms of intellectual property, and they have been properly registered with the Copyright Office or USPTO, then your business can sue them in court for money damages and/or an injunction preventing their further infringement. Thus, registration is an important part of your IP strategy.

Using Nondisclosure Agreements

Not all IP fall neatly into copyrights, patents, and trademarks. Trade secrets include any formula, pattern, physical device, idea, process or compilation of information that provides the owner of the information with a competitive advantage in the marketplace and is treated as confidential.

Trade secrets are not "registered" with the federal government. So how can you protect them?

Nondisclosure agreements (NDAs) are a critical tool for employers who seek to maintain confidential information. An NDA is a contract in which the employee promises to protect the confidentiality of secret information that is disclosed during employment or related types of business transactions. By using a nondisclosure agreement, an employer can ensure that its secrets stay secret, by giving the company legal recourse against an employee who wrongfully discloses them.

What must an NDA include? Most importantly, they must define the specific information meant to be kept confidential. They must also set forth reasonable uses of that information, such as proper use for work-related purposes, including the identities of any individuals or entities with whom the information can be permissibly shared (vendors, perhaps). Finally, NDAs will typically include reasonable limitations on their time and scope. For example, the document might note that its terms expire within three years.

In addition to registering your company's copyrights, trademarks, and patents, having employees sign NDAs can be an important part of a company's strategy to guard against infringement of its IP.

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