Employees Are More Mobile Than Ever… Make Sure Your IP Isn’t

By Nick Yocca and Mark Yocca, Partners, The Yocca Law Firm

As Orange County’s economic climate improves, businesses will hire new employees and competitors will try to lure away employees. In light of an anticipated wave of employee movement, this is an appropriate time to review procedures for protection of IP. We offer a few general guidelines.

First and foremost, know your IP.  Businesses and their counsel should assess the actual scope and value of their trade secrets and other IP for many reasons. The Bratz-doll legal saga illustrates one reason. Mattel secured a $100 million victory in the first trial, but suffered a $300 million loss in the second trial. The Court of Appeals ordered a second trial in part because Mattel’s “Assignment of Inventions Agreement” did not unambiguously cover some of the IP that Mattel sought to protect. Every business needs to understand the full scope of its IP in order to protect it. Theft of trade secrets is a serious threat.

Second, update Confidentiality Agreements and IP protection policies. Confidentiality Agreements should match the IP actually owned and clearly define the employer’s expectations. For example, if the employer expects to own employee inventions made outside of working hours, the agreement must unambiguously say so. Again, Mattel’s “Assignment of Inventions Agreement” fell short in this way. Too often employment law advice really does not focus on IP and confidentiality and assignment of inventions agreements.

Third, enhance your computer protections and policies. Courts will not protect a business’s trade secrets if the business fails to reasonably protect itself. Businesses should consider more than password protection for each item of confidential information on company computers – restrict access on a need-to-know basis, frequently change passwords, monitor access, and require employees to use only company-issued personal electronic devices. Written policies should clearly advise employees that the data belongs to the business.

Fourth, make sure the employees understand all Confidentiality Agreements and IP protection policies. Having an employee initial a form Confidentiality Agreement in a stack of new employment documents will do little good. Businesses should formally, early and often explain the requirements to their employees. When an employee leaves, again remind him or her of these obligations, conduct an appropriate exit interview, secure the return of company electronic devices and image the devices for possible further investigation that may become necessary.

Establishing adequate procedures can become crucially important when disaster strikes – a competitor gets its hands on the business’s “secret sauce.” If that happens, businesses need to act fast to ascertain the scope of the problem and take appropriate action. Businesses that have not invested in protecting their IP assets may have few legal options.