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Rules of Engagement: Minimizing Trade Secret Disputes when Hiring Rival Employees

When companies consider bringing a new employee on board, the applicant’s prior experience is usually a significant factor in the decision-making process. If the prospective employee is coming from a rival company, ensuring that they’re not improperly disclosing trade secrets should also be part of the new-hire checklist to lessen the possibility of trade secret disputes and litigation.

As a preliminary measure, company leaders can curtail improper activity around trade secrets through the “tone at the top” by establishing a corporate culture that discourages managers from asking incoming workers to share their former employer’s confidential information. Companies can also explicitly communicate this expectation to potential employees during the hiring process and require the new hire to sign a statement that they won’t use their former employer’s trade secrets. In situations where the risks of improper use of the rival company’s confidential information are high due to the nature of the work, companies can monitor a new employee’s computer systems.

What should companies do if they’re on the other side of this equation? If there’s evidence that a former employee who jumped ship for a rival concern is trading on your organization’s secrets, putting the other company on notice may stop the improper activity. Notice can include anything from a phone call to a formal letter to filing a lawsuit, possibly including a request for a temporary restraining order or to seize the other company’s property for inspection.

Creating a culture that values and reinforces ethical business practices and promptly attending to breaches of trade secret confidentiality keeps trade secrets in-house when employees move on.

In the final installment in our blog post series on trade secrets, we’ll review when to make confidential information a trade secret and when it’s better to apply for patent protection.

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Adam P. Samansky is an intellectual property litigator at Mintz. He primarily serves pharmaceutical, medical, high tech, and defense industry clients. Adam handles patent, trademark, and trade secret matters for innovators and investors, and he has a successful record in Hatch-Waxman litigation.

Nicholas W. Armington

Special Counsel

Nicholas W. Armington is an intellectual property attorney at Mintz who focuses on patent and trade secret litigation. Nick represents clients before the International Trade Commission and in US District Courts. His work involves network devices, semiconductors, converged devices, and LED lighting.