As More Employees Work Remotely, Protecting Trade Secrets Must Remain “Essential Business”

COVID-19 Update

Date: March 26, 2020

With the rise and exponential spread of a novel coronavirus inflicting hundreds of thousands of people the world over with coronavirus disease 2019 (COVID-19), 21 states, 47 counties and 14 cities, including California, Illinois, Michigan, New York, Ohio and Wisconsin, have issued “shelter in place” or “stay at home” orders affecting at least 200 million Americans. It seems likely that similar orders from other state and local governments will follow. These governmental orders require the closure of business locations that are non-essential, and for many businesses, employees are now working from home on a scale never before experienced. Among the challenges these businesses immediately face is ensuring that their trade secrets remain protected and confidential while, at the same time, ensuring that their employees can continue to work effectively from their homes.

In order to qualify as a trade secret, the company possessing the secret must show that it instituted reasonable measures to ensure that the information remains a trade secret. Accordingly, employers must strike a balance between giving employees who are working at home enough access to trade secrets to allow them to adequately perform their jobs, while also taking sufficient steps to keep the secret protected. Whether the trade secret is given to the employee in hard copy or electronic form, risk of exposure can come from many sources, including lost or misplaced documents or devices, hackers, careless family members, or dumpster divers looking for valuable and confidential information.

As some employers downsize and many employees move to competing corporations, there is no doubt that future trade secret litigation will involve challenges to the status of claimed trade secrets due to failures to maintain adequate protection during the time of COVID-19. Companies must act now, as the failure to protect trade secrets during this critical time will have ramifications long after the pandemic has subsided and business returns to normal. To avoid this happening to your business, you must take proper steps to ensure that your trade secrets remain safe, secured and protected:

  • Establish a trade secret policy—and share it. It is imperative to develop a policy regarding the handling of trade secrets, including how they are to be labeled, where they are to be maintained, which group(s) will have access to them, and what procedures will be implemented to ensure their security. And regardless of whether a policy is new, or an existing policy that some employees have seen before, companies should circulate it immediately and require employees to read and sign it. For any workers who are to have remote access to trade secrets, the policy should also include confidentiality and non-disclosure provisions. Do not allow employees remote access to trade secrets until they have returned a signed copy of the policy.
  • Train employees. Companies should provide periodic reminders to employees accessing trade secrets about what materials are considered trade secrets and how those documents are to be used. Reminders should also reinforce that access to the documents is restricted only to those people who have a legitimate need to know the information for their work and the importance of maintaining proper security protocols.
  • Establish cybersecurity protocols. Ensure that the company’s remote cybersecurity policies and procedures are designed to address the unique risks of the work-at-home environment. A well-designed policy for office access may be inadequate when a workforce is largely working remotely. Issues to consider as part of the remote cybersecurity policy include:
    • Should employees be permitted to work only on company-issued devices?
    • How is information controlled if employees are permitted to use personal devices?
    • Is the company able to retrieve documents or information that have been downloaded to an employee-owned computer without court intervention? Particularly now, when many courts are closed, there may be no ability to get immediate relief from an unscrupulous employee.
    • Should the company utilize software that tracks or monitors a remote employee’s behavior?
    • Does the company have any software that will “flag,” or identify, in real time, whether an employee has downloaded or copied trade secret information?
  • Utilize a VPN, if possible. If employees are working with trade secrets remotely, external networks may prove to be weak spots for hackers to exploit. As an extra layer of protection, companies should implement virtual private networks (VPNs) and multifactor authentication. However, VPN use presents its own challenges, and organizations should be prepared to address them and other information security concerns. Please see our firm’s recent Privacy & Cybersecurity update addressing technical, physical and security risks associated with telework and remote access.
  • Establish a procedure for termination of remote employees who have access to trade secrets. If a remote work employee is laid off or terminated, the company should have a policy and procedure that is designed in advance to ensure that the employee cannot steal or otherwise compromise the company’s trade secrets. The company should also have a plan for how to recover the company’s property from the remote employee. If a company-issued computer or cellular phone contains trade secret information, the company should have procedures to remotely lock the devices and then safely recover them.

The novel coronavirus pandemic has created a paradigm shift in the way that companies are conducting business, and it can be difficult to manage the many different issues that now require immediate attention. In many instances, though, trade secrets are among a company’s most valuable assets, and protecting those secrets from disclosure must remain essential business for all companies, whether or not employees are working remotely. If you have any questions about protecting your trade secrets or the policies and procedures that you should have in place while your employees work remotely, please contact one of our attorneys who specialize in this area.

FOR MORE INFORMATION

For more information, please contact:

Steven Block
312.998.4242
Steven.Block@ThompsonHine.com

Matthew David Ridings, CCEP
216.566.5561
Matt.Ridings@ThompsonHine.com

Natalie Gabrenya
312.998.4263
Natalie.Gabrenya@ThompsonHine.com

ADDITIONAL RESOURCES

We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our COVID?19 Task Force web page for additional information and resources.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

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