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A critical element in proving a trade secret is establishingthat reasonable efforts were undertaken to protect the information claimed tobe protected as a trade secret. This element is universal and must be provenunder the Uniform Trade Secrets Act ( see, e.g., Ala. Code � 8-27-2), thecommon law in those states that have not adopted the Uniform Trade Secrets Act( see e.g., Uniroyal Goodrich Tire Co. v. Hudson, 873 F. Supp.1037, 1040 (E.D. Mich. 1994), or the Economic Espionage Act, making it afederal crime to steal trade secrets. ( See18 U.S.C. 1839 (3)(A)) Thisarticle will examine the reasons for this requirement and what companies can doproactively to ensure that the steps they take will protect their valuableintellectual property from being disclosed to competitors. EVIDENTIARY AND REMEDIAL SIGNIFICANCE Judge Richard Posner of the 7th U.S. Circuit Court ofAppeals explained in Rockwell Graphic Systems Inc. v. DEV Industries Inc.,925 F.2d 174, 178 (7th Cir. 1991), that this “requirement of reasonableefforts has both evidentiary and remedial significance.” The”remedial” aspect of the reasonable efforts requirement is to providea legal remedy to a company whose confidential and proprietary information hasbeen taken by improper means. “The greater the precautions that … [theowner of the information] took to maintain the secrecy of the …[information], the lower the probability that [the accused thief] obtained themproperly and the higher the probability that it obtained … [the information]through a wrongful act.” The evidentiary significance of taking reasonable efforts toprotect trade secrets is to show that the information sought to be protectedhas “real value.” As Posner explained, the information cannot beworth much if the owner “did not think it worthwhile to make seriousefforts to keep the information secret.” Moreover, if the owner of thetrade secrets “expended only paltry resources on preventing” itsinformation “from falling into the hands of competitors … why should thelaw, whose machinery is far from costless, bother to provide” the owner ofthe trade secret “with a remedy?” This requirement of taking reasonable efforts presentsserious practical questions to companies that have a need to protect theirtrade secret information. This question becomes particularly critical if anurgent need arises to enlist court protection in either a civil or criminalcontext. All too often companies address this issue in a reactive posture aftervaluable information has already left the company and in an effort to prevent acompetitor from using that information, they must prove in court thatreasonable efforts were taken to protect information they are claiming isdeserving of trade secret protection. The best time to address this issue isnot in a crisis situation, but before the information is taken. The benefit ofsuch a proactive approach is not only to have a thoughtful and formulated planthat actually protects the company’s trade secrets, it also provides thepredicate for convincing a court that the information is worth protecting. The question becomes: What are reasonable efforts? As Posnerrecognized, “[T]he answer depends on a balancing of costs and benefitsthat will vary from case to case and so require estimation and measurement bypersons knowledgeable in the particular field of endeavor involved.”Reasonableness must be measured in terms of the type of information beingprotected and the circumstances under which the information is used in thecompany�s business. There is no one solution that fits all circumstances. Thesecircumstances include how many people need to have access to the information toconduct the company’s business, the restrictions that can be placed on theinformation without making it impossible to use the information to conduct thecompany’s business and what restrictions will make it less likely that theinformation will find its way into the hands of competitors. The goal is toarrive at an overall plan that one can argue provides reasonable protectionsunder these varied circumstances. This can be accomplished in a number of simple but practicalways on a number of different levels. The first level of control is creating a companyculture in which protecting trade secrets is the accepted norm. This includesclear policies spelling out what company information is considered a tradesecret and training employees on the need and rationale for protecting thecompany’s valuable information. The message company-wide is that everyone has astake in the protection of the company’s IP. A loss of these valuable companyassets can translate into a loss of jobs. Remind everyone of the old adage –”loose lips sink ships.” There are a number of company policies that are relativelysimple that can be instituted to reinforce this security consciousness. Forexample, everyone should be warned not to provide his or her computer passwordsto others. This problem can be particularly acute where a company usestemporary employees who may be with the company for only a brief tenure andpasswords are shared because of the effort required to create temporarypasswords for brief periods. Confidential and Proprietary documents should bestamped “CONFIDENTIAL.” A “clean desk” policy ensures thatall work documents are out of sight and in some instances locked up when notbeing used. This type of physical security, depending on what is reasonableunder the circumstances, can range anywhere from using a file cabinet to a safeor using sign-in procedures to enter the company’s premises to employingsecurity guards and/or surveillance cameras at the company’s entrances andexits. A prohibition against e-mailing work home over the Internetreinforces the lack of security involved in sending out sensitive informationover the Internet. While all company personnel are obligated by law not todisclose company trade secrets to third parties or use company trade secretsfor non-company purposes — an obligation that continues after their employmentwith the company — memorializing this obligation in a Confidentiality Agreementdemonstrates that the company takes this obligation seriously and has taken anextra measure to protect its important information. The same applies to postemployment covenants prohibitingemployees from using the company’s trade secret information to divert thecompany’s customer base or to raid its work force. An often overlooked part ofany such policy is a clear reminder that the information is not any lessprotected because someone has committed the information to memory as opposed toremoving a company document containing that same information. The cornerstone of an effective program designed to maintainthe secrecy of trade secret information is a working policy that strictlylimits sensitive information to only those who need the particular informationto perform their jobs. This “need to know” policy mirrors how theCentral Intelligence Agency operates to avoid any one individual from knowingall of the CIA’s secrets. Such a policy can be implemented in a number ofpractical ways without being overbearing. For example, the company computerscan be set up with password protection and codes that limit the scope ofinformation that can be accessed by particular employees. Access to sensitiveareas of a company — for example, where highly confidential research isperformed — can be limited through card key access that only permits individualsin those parts of the company in which they need to be in order to performtheir jobs. Sensitive company documents such as a marketing plan should bedistributed to only those in the company who need the information to performtheir duties. In certain circumstances it might make sense to institute atracking system that retrieves and shreds the documents after they are used andreviewed. DON’T OVERLOOK OUTSIDERS WHEN CREATING PROGRAM Not to be overlooked in creating a program of reasonablemeasures to protect the company’s trade secrets are company outsiders who mayhave a legitimate need to know the company’s confidential information. Theseoutsiders include consultants or potential suitors interested in acquiring thecompany. Not only must the importance of maintaining secrecy be conveyed tosuch third parties, but it is almost certainly advisable to enter intoconfidentiality agreements with such outsiders who do not owe the same legalduty to the company as its officers and employees. Finally, any program of reasonable measures must addresscompany procedures when an individual leaves the company. It is at thisjuncture that the company is most vulnerable to the loss of confidentialinformation. The classic case is the former officer or employee who takes thecompany’s confidential information and forms a competitive venture based on themisappropriated information. Certain standard policies should be in place.These include a formal reminder to the departing employee of his or herpostemployment obligations not to use or disclose the company’s confidentialinformation. Most people, when told and reminded of their legal obligations,will abide by those obligations. All confidential information in the possessionof the employee — whether at the office or at home or in original or duplicateform — should be retrieved and inventoried. Most importantly, this includesdigital information contained on the company computer used by the employee andmay even include information on home computers, if the company has a practiceof allowing its employees to work at home. In sum, reasonable measures can provide significantprotection to a company’s intellectual property and reduce the chances thatsuch information will find its way to a competitor. In addition, if the needarises to seek a court’s assistance in enjoining the use of such information bya competitor, the proactive implementation of reasonable measures to protectthe company’s trade secrets provides the predicate for the evidentiary facts toprove to a court that the company has taken the measures necessary to provethat the information is, in fact, a trade secret worthy of the court’sprotection. Nick Akerman is a partner and coordinator of the tradesecrets protection program at Seyfarth Shaw, www.seyfarth.com. Based in the firm’s New Yorkoffice, he can be reached at [email protected].

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