Preventing competitors from tapping your secrets

Many companies accumulate trade secrets, such as pricing schemes, business plans, and production shortcuts, but they don’t want competitors to tap into this private reserve of knowledge. The easiest way  for a competitor to obtain these secrets is by hiring one of your key employees. A recent case from the U.S. 5th Circuit Court of Appeals (whose rulings apply to Texas, Louisiana, and Mississippi employers) covers this topic and is currently in progress.

The basics

Before we get into the case, here are the basics:

First, you can require prospective employees to sign a noncompetition agreement, which prevents them from working for a competitor, and/or a nondisclosure agreement, which allows them to work wherever they want but prevents them from divulging or using your trade secrets.  

Second, if information is truly secret—and you’ve maintained it as secret—and harm would result if a competitor gains control of it, you can seek relief from a court.

Third, to obtain relief, you must file a lawsuit—generally against both the employee who left and the company that hired the employee—alleging breach of contract, wrongful interference with a contract, theft of trade secrets, and the like. For relief, you must ask for a temporary restraining order (TRO), which freezes the employee and employer in place for a few weeks, and a temporary injunction (TI), which is issued after a mini-trial and freezes the employee and employer in place until the full trial. If both a TRO and a TI are issued, the employee can’t start work, and the employer can’t hire the employee until the full trial.