In order to remain competitive today, American companies must increasingly take steps to protect their confidential information and trade secrets from improper disclosure to competitors. Failure to do so may mean the loss of key intellectual property assets, ranging from key customers (and related buying patterns, preferences and contact information) to confidential research and development techniques and competitively sensitive manufacturing processes that could erode, if not entirely eliminate, a company's edge in the marketplace.

Most businesses today have a general idea of what constitutes confidential information and trade secrets. Generally speaking, it is any information about a company which is not known within its industry and which confers a competitive advantage upon that particular company. Importantly, such information must also be the subject of reasonable efforts to make and keep it secret. Examples of legally protectible trade secrets include a company's customers, suppliers, formulas, plans, techniques, designs, and compilations of data.

However, while almost all companies recognize that they may possess various forms of confidential information and trade secrets, many have no clear understanding of what legal steps they must take to safeguard such data. The following is a list of ten things that companies can do to try to protect their competitive intelligence:

1. Warn Employees. Advise employees that in the course of their employment they will be privy to certain confidential information and that they have a legal duty not to use that information for any party other than their employer. Employers should never take for granted that their employees necessarily appreciate that certain data is competitively sensitive and should advise them both orally and in writing of its confidential nature. Such warnings should be specifically referenced in employee policy manuals and, where appropriate, incorporated into written employment agreements. Such admonitions should be coupled with warnings that employees’ failure to safeguard their employer’s competitively sensitive information could be a grounds for termination of employment and have other adverse legal ramifications. Conveying this message clearly, and repeating it frequently, are among the best ways for companies to safeguard their intellectual property assets. Moreover, be aware that while most confidentiality covenants arise in an employment setting, such provisions have value in other circumstances as well, ranging from the retention of independent contractors (such as computer consultants) to the disclosure of financial information to a potential business partner or suitor. Accordingly, do not hesitate to put others on notice of the importance of your competitively sensitive information in any business dealings where confidentiality may be an issue.
2. Limit Access. Limit competitively sensitive information to employees on a need to know basis. Generally speaking, lists of a company's various customers should not be readily available to all employees — at least not if the company regards the identity of its customers as confidential. Further, access to scientific information involving competitively sensitive processes, designs and techniques should be restricted to those technical and managerial employees who require such information to carry out their duties. Making such information broadly accessible to employees within the company could make it more difficult to establish that it constitutes a trade secret should litigation arise. Competitively sensitive information should expressly be designated as “confidential,” either with a confidential stamp (ideally in red ink) or in some other fashion that unmistakably puts the recipient on notice of its unique importance to the company.
3. Improve Security. Implement adequate security procedures so that visitors to the company's operations would have no reason to become privy to confidential information upon visiting the premises. Visitors should be asked to sign in and out and escorted by a company representative when moving about the premises. During non-business hours, sufficient security measures should be in place to safeguard against unlawful entry and misappropriation of trade secrets. Cameras should be used to record activities in company facilities and employees should be made aware that their actions may be subject to close scrutiny. While individual employees’ privacy must be respected, sending a message that business activities that are conducted in public view may be monitored could be a meaningful deterrent to employee theft of company property, be it tangible or intangible.
4. Limit Certain External Communications. In external communications, make sure that care is taken not to inadvertently divulge trade secrets. For example, if a company publishes the identity of several of its customers in promotional materials, it should realize that by doing so it is running the risk that the identity of those customers may no longer be deemed a legally protectable trade secret. While such disclosures may occasionally be necessary for business reasons, they should be kept to an absolute minimum. Once competitively sensitive information enters the public realm, it is virtually impossible to retrieve it. Public disclosure of competitively sensitive information, even if inadvertent, is one of the principal defenses used by defendants accused of taking their employer’s confidential information and trade secrets.
5. Implement Password System and Manage Contacts. Limit access to sensitive computer-related information through the implementation of a system of passwords that effectively prevents unauthorized access by those employees motivated more by curiosity than a genuine need to know. When employees leave the company, make sure that all passwords that they may have been using have been changed so that they can no longer tap into any company files or other competitively sensitive information. To the extent employees were point persons for receiving certain information from third parties or interfacing with key company contacts, all such links should be terminated immediately upon separation, with third parties promptly put on notice of the employees’ departure and the substitution of a new company contact.
6. Execute Non-Compete Agreements. Consider having employees sign non-competition agreements if they are privy to competitively sensitive information in the course of their employment. Such agreements, which restrict an employee's ability to work for a competitor upon leaving the company, are legally enforceable in most states so long as they are reasonable as to both time and geographic scope. Clearly define the scope of competitors that an employee is prohibited from joining upon departure; in certain industries, it may even be appropriate to identify those competitors by name. Generally speaking, the length of time restriction should be of a reasonable duration and geographic scope, taking into account the nature of the employer’s business and the professional duties that the individual employee discharged on behalf of their employer. The legal enforceability of such provisions may vary depending on the state where the employee is located as well as the timing and circumstances under which the restrictive covenant is executed, making consultation with legal counsel prior to implementation of such agreements generally advisable. For example, be aware that in Pennsylvania and certain other jurisdictions, non-compete agreements that are introduced in the midstream of employment must be supported by material additional consideration, frequently in the form of higher pay and improved benefits. In contrast, non-compete covenants in a conventional employment setting are typically not legally enforceable in California, although covenants that are part of the purchase and sale of a business there generally are upheld as valid.
7. Require Non-Solicitation Clauses. As an alternative (or even as a complementary measure), an employer may require that its employees not solicit either its customers, suppliers or employees should the employee leave its employ and join a competitor. Such restrictions are generally viewed more favorably by the courts than non-compete covenants insofar as they do not prevent an employee from working in the same industry, but simply preclude that employee from trading upon confidential information that he acquired through his prior employment to advance either his own interests (or those of his new employer). Framing such provisions so that they prevent solicitation as well as any actions that might damage the employer’s legitimate business interests might be one way to avoid disputes about whether the challenged post-employment activity constituted solicitation, per se.
8. Conduct Exit Interviews. Conduct an exit interview with departing employees whenever possible, using the occasion to remind them of their legal obligations to maintain certain information as confidential. Communicating this message both orally and in writing is advisable. Any competitively sensitive information in the possession of the employee should be retrieved at this time, along with company-issued laptops, cellphones or other electronic equipment, together with office keys or any other computer cards that afforded the departing employee access to company facilities.
9. Execute Acknowledgements. Where appropriate, have the exiting employee sign a statement expressly acknowledging that he has been privy to trade secret information belonging to his employer, that he recognizes that he has a legal duty to maintain that information as confidential and that he will honor that obligation. Such written statements reinforce the message about the need to safeguard competitively sensitive information and may serve as useful evidence in litigation should the employee breach his duties. To the extent employees refuse to execute such acknowledgments upon departure, increased scrutiny of their post-employment activities may be warranted.
10. Contact Subsequent Employers. Consider advising the employee's future employer (if it is in the same industry) that the employee has been privy to certain confidential information while in the company's employ and that such information must not be used to benefit any other employer. Such correspondence will place a subsequent employer on formal notice of the employee's prior access to competitively sensitive information and may serve as a further basis for a claim against the subsequent employer if, together with its new employee, it misappropriates any such information for its own benefit. Identifying and then contacting subsequent employers about the former employee’s continuing confidentiality obligations may be facilitated if such a provision is incorporated into their initial employment agreement or other contract-related documentation.

Protecting competitively sensitive information today is a difficult, but nevertheless vital task that virtually all companies must address in some fashion. Although the particular measures that should be implemented will vary depending upon the circumstances, the ten points set forth above may provide employers with a general outline of how they should go about protecting their confidential information and trade secrets. If nothing else, following these basic precepts may strengthen an employer’s hand should litigation arise over whether an employee has faithfully safeguarded his former employer’s confidential information and trade secrets.