How to Avoid Liability for Misappropriation of Trade Secrets When Hiring from a Competitor

By concentrating on the protection of their own trade secrets, employers can overlook the importance of carefully handling their competitors’ trade secrets when hiring employees who had access to such proprietary information. Departing employees might take confidential information or trade secrets from their former employer to use on behalf of their new employer. In this scenario, both the employee and the new employer may face liability for misappropriation under the Minnesota Uniform Trade Secrets Act or the federal Defend Trade Secrets Act. The cost of litigating trade secrets disputes is high because of their complexity and technical nature, the magnitude of potential damages that may be awarded, the need for expert testimony, and the possibility that the plaintiff may receive an award of attorney’s fees if successful. Therefore, to minimize potential liability for their employees’ misappropriation of trade secrets, employers should take steps to ensure that new employees do not use or disclose their former employer’s confidential information or trade secrets at their new job.

Tips to Avoid Liability for Misappropriation of Trade Secrets

To minimize the risk of liability when hiring from a competitor, employers should take the following defensive steps:

When interviewing a candidate, never ask any questions that relate to the competitor’s confidential information, such as customer lists, product development, marketing strategies, and pricing. Employers may, however, ask about the candidate’s accomplishments and responsibilities.
Warn interviewees not to reveal confidential information or trade secrets from current or previous employers during the interview process or eventual employment.
When considering a prospective employee, inquire about any existing confidentiality and non-compete agreements. Employers should also ask for copies of any offer letters, employment contracts, and employee handbooks that may mention definitions of confidential information and restrictive covenants.
Ask your employment attorney to look over the offer letters, employment contracts, and employee handbooks and to advise you on the potential risks and limitations of hiring the candidate.
In your offer letter and/or employment contract, explicitly state that the employee should not bring or use any confidential or proprietary information that was obtained at his previous jobs. Require the candidate to explicitly acknowledge and confirm that she has not retained any confidential information or trade secrets from other companies and has returned all her former employer’s property.
Explicitly state in the offer letter that her employment may be terminated for bringing or using or disclosing confidential or proprietary information from other companies.
If feasible, at the beginning of employment, consider assigning duties and responsibilities that are slightly different from those that were assigned to the employee by the competitor. Specify the different duties and responsibilities for the first few months of employment in the offer letter and or employment contract.
Once employment has begun, perform routine checks to make sure the employee is not using the confidential or proprietary information of third parties, monitor the files that have been uploaded onto the company’s server, and ask other employees about any mention of trade secrets.
If the employee engages in misappropriation of trade secrets, immediately take disciplinary action, return the trade secret information to the employee, remove all copies from the company’s computer server and devices, and consider possible termination of the employee.
Keep a record of all the steps you took to avoid liability for misappropriation of trade secrets.

For more information on trade secrets laws and strategies for minimizing the risk of misappropriation of trade secrets, contact one of the Minnesota trade secrets protection attorneys of Trepanier MacGillis Battina P.A. at 612.455.0500.
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About the Author:
Minnesota trade secrets protection attorney Craig W. Trepanier regularly represents Minnesota employers in trade secrets matters including drafting confidentiality agreements, non-disclosure agreements, trade secrets protection plans, and misappropriation of trade secrets litigation. If you have questions about Minnesota trade secrets protection or liability for an employee’s misappropriation, please contact him at 612.455.0502 or craig@trepanierlaw.com. Trepanier MacGillis Battina P.A. is a Minnesota trade secrets law firm located in Minneapolis, Minnesota.