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What happens if an employee shares trade secrets?

On Behalf of | Jun 20, 2023 | intellectual property law

Every successful company knows the importance of trade secrets. These confidential pieces of information give businesses a competitive edge, enabling them to stand out in the industry. However, problems arise when an employee decides to reveal these secrets, potentially jeopardizing the success of the company.

When a company faces such a betrayal, it has to take immediate action. The faster the company acts, the better the chances of minimizing the damage.

California’s trade secret laws

The California Uniform Trade Secrets Act protects trade secrets. This law provides a broad definition of trade secrets, including formulas, techniques, methods and processes that derive economic value from not being generally known. If an employee reveals these secrets, they breach this act.

The law allows a company to seek an injunction against the person revealing the secrets. The company can also sue for damages. It is essential to have documentation proving the employee had knowledge of the confidentiality of the information.

Addressing the revelation of trade secrets

The first step when an employee reveals trade secrets is to contain the leak. This means securing any remaining confidential information. Ensure that your business has revoked all security credentials of the employee to prevent further breaches.

Next, assess the damage caused by the leak. Identify how much information the employee revealed and to whom they revealed it. This will help in determining the potential harm to the company.

It is then necessary to report the breach to the authorities. Under California law, the company can file a complaint against the employee for violating the terms of confidentiality. Additionally, if the business can prove the employee sold the trade secrets to a foreign entity, the courts may hold them in violation of The Economic Espionage Act of 1996, which can result in fines of up to $5 million and up to 15 years in prison.

Taking preventive measures

To prevent such occurrences in the future, companies need to implement strict measures. These may include nondisclosure agreements that employees sign upon joining the company. Companies should hold regular training sessions about the importance of trade secrets and ensure all workers have a clear understanding of the consequences of revealing them.

The revelation of trade secrets by an employee can be damaging to a California company. However, with a swift response and preventive measures in place, a company can manage this issue effectively and safeguard its competitive edge in the industry.