In 2012, Ted Schroeder sued Pinterest, alleging that his former angel investor and business partner Brian Cohen had stolen the idea for a socially networked “bulletin board” on the internet from Schroeder and given that idea, along with other trade secret information, to Pinterest’s founders in 2009.
Unfortunately for Schroeder, the court dismissed the case, finding that his alleged trade secrets were either public or described too vaguely to be protected (i.e., “business and management information” trade secrets).
Earlier this month, the appellate court agreed with the lower court. It pointed out a number of problems with Schroeder’s claims, perhaps most importantly, the fact that Schroeder had shared the alleged secrets with the whole world when Schroeder’s Rendezvoo.com website went live on the internet.
In addition, he had shared the allegedly nonpublic aspects of idea with web designers, potential investors, public relations firms, and focus groups without requiring them to sign confidentiality agreements.
To protect your own business’s valuable trade secrets, you should follow these guidelines:
1. Employees, independent contractors and others with access to confidential information should be required to sign nondisclosure-nonuse agreements (often called “NDAs”) before being granted access to the trade secret information.
2. Label copies, whether tangible or digital, as “confidential” or “trade secret.”
3. Keep tangible copies of confidential information in a locked room, safe or file cabinet, accessible only to those who need access to that information to properly perform their jobs.
4. Password-protect company networks. Use separate need-to-know network areas for confidential information. You should also consider encrypting the information.
5. Teach employees how to protect trade secrets and explain why it’s necessary.
6. Prohibit employees from using flash drives, unless that use is required for the person’s job, since these portable drives make downloading confidential information quick and easy. You can also obtain software to alert you when files are copied to external devices.
7. Make sure all employees and independent contractors know who to contact if they have any questions about your trade secret policy or whether certain information is considered confidential.
8. Require visitors to sign in and out, and do not allow them to be in any areas containing confidential information without an escort.
9. Conduct exit interviews with employees, reminding them of their continuing legal obligations with respect to your company’s trade secrets and other confidential information. Also, make sure you get back all of your business’s property.
10. Scrub the drives of any electronic devices (including computers, smartphones and copiers) before disposing of them.
11. So that you can take advantage of the benefits of the federal Defend Trade Secrets Act (DTSA), make sure all agreements with employees and independent contractors that have clauses protecting confidential information include an appropriate whistleblower protection notice.
Please feel free to contact us if you’re interested in obtaining more information about how to protect your trade secrets or if you need help updating your agreements or employee handbook.
