TSI Symposium Tackles Tough Questions on Managing Employee Trade Secrets

When Russell Beck, a partner at Beck Reed Riden, asked a roomful of students and attorneys at the Trade Secrets Institute (TSI) symposium “Working Knowledge: Managing Employee Trade Secrets,” on Feb. 15, whether they had ever left a job, almost every hand shot up. When he then asked whether anyone had taken trade secrets when they left a job, all but two hands went down. The reality however, Beck said, is that around 50 percent of employees take trade secrets with them – knowingly or unknowingly – when they switch from one employer to another.

“Companies can use confidentiality agreements to avoid this, but enforceability is a problem,” said Beck. That leaves companies with few options aside from the noncompete agreement, which can be complicated and controversial. The symposium focused on the uses and problems with noncompete agreements and the best ways to address the biggest threat to IP security: employees.

“Thanks to the technology we all use, it’s almost impossible for a white collar worker to avoid taking something,” Adjunct Professor Steven Kayman, a partner at Proskauer Rose, said during the first panel, “Noncompete Agreements: Reactions and Reform.” TSI Fellow Marissa Potts ’17 moderated the panel, which included Peter L. Altieri, Member of the Firm at Epstein Becker Green, and ReNika Moore, bureau chief at the Labor Bureau of the Office of the New York Attorney General’s.

Altieri explained that the purpose of a noncompete agreement is to protect trade secrets and confidential information as well as to protect client relationships and good will. Such agreements have their drawbacks, however, including a patchy web of legislation and statues that differ depending on the state and country, and the fact that many are written extremely broadly and can be hard or impossible to enforce.

Moore discussed legislation that the New York attorney general plans to introduce to address misuse of noncompetes in the state, where the rules currently governing such agreements come from common law and not statute. When determining misuse, the attorney general looks at both geographic and temporal scope.

“We’re particularly concerned about worker mobility and limits on economic mobility,” Moore said. “There’s a chilling mechanism before the question of whether a noncompete is enforceable ever reaches the courtroom.”

There has been a call to action on this issue, Beck explained, noting that nine states recently changed their laws, and all but one making the agreements harder to enforce. At the federal level, Senators Chris Murphy, D-Conn., and Al Franken, D-MN., introduced the Mobility and Opportunity for Vulnerable Employees (MOVE) Act in 2015 and are expected to bring it up for a vote again this year.

The second panel, “Trusted Colleagues or Enemies Within? Employees and Trade Secrets” was moderated by TSI Fellow Kelly Malloy ’18 and included Kayman; Joe McFadden, associate general counsel at McKinsey & Co.; and Marisa Warren Sternstein, partner at Pedowitz & Meister.

“The number one most common vulnerability companies face is the human one,” said McFadden, pointing to the recent hack at the Democratic National Committee as one high-profile example. The second most common threat is vendors and third parties.

“Understanding the ways that people can get into your system is the first part of figuring out how to protect it,” he said. Not long ago, companies acted on the assumption that all data was equally important, but that’s no longer the case. Different types of information need different types of security, and it’s important for a company to know exactly what it has, where it’s kept, and who has access to it, McFadden explained.

Sternstein discussed the way technology has altered the landscape of privacy and data protection. She cited the example of Sasqua Group v. Courtney, in which a former employee, Lori Courtney, took a database from a consulting firm when she left. Her attorneys argued that everything she took was publicly available, and Courtney claimed she could easily reconstruct the database using Google or LinkedIn. She also had not been asked to sign any kind of confidentiality agreement. The court sided with Courtney. Sternstein said the case was an excellent example for employers for what not to do and instructive of how much has changed since the early days of trade secrets law. In Sasqua, the court determined that it was up to the jury to decide whether LinkedIn contacts can be considered trade secrets.

“The internet has really changed the way we think about trade secrets,” Sternstein said.