Trade Secret Protection Strategies: Based on Talent Management

December 2023

Jane Tsai and Doris Hsu

As global competition within the technology industry sector continues to escalate, cases involving domestic and international enterprises acquiring competitors’ trade secrets through employee poaching or employees leveraging trade secrets of their current employer as bargaining chips to negotiate better terms of employment with a potential employer are becoming increasingly prevalent.  Enterprises must prioritize efforts to mitigate two critical scenarios:: firstly, safeguarding their own trade secrets against unauthorized acquisition, and secondly, ensuring that both the company and its employees refrain frominfringing upon the trade secrets of others.

Upon scrutinizing these two scenarios, it becomes apparent that employees play a pivotal role in the protection of trade secret. The means by which a company can avert the loss of confidential information fundamentally hinges on effective talent management. Control points need to be instituted at various stages of the employee lifecycle, spanning from recruitment and employment to departure.For example, during the pre-employment phase, enterprises should conduct background checks on new hires to confirm whether they are subject to non-competition agreements with previous employers. Furthermore, it is imperative to explicitly outline confidentiality obligations in both employment contracts and confidentiality agreements. In certain cases, specific measures like “clean room measures” can be implemented for employees in research and development positions to prevent the inadvertent disclosure of trade secrets from previous employers. During the employment phase, enterprises should establish a robust internal authority control system, inform employees of the trade secret policy, and ensure employees’ thorough understanding through events such as education and training activities.  In the departure phase, exit interviews assume a critical role in reinforcing confidentiality obligations. These interviews should aim to elucidate the scope of non-disclosure agreements, and evaluate the necessity for non-compete clauses.

Trade secret litigation cases pose a lengthy and challenging journey for both the victimized and the infringing enterprises. Enterprises should take a preventive stance, checking in advance whether they have comprehensive management processes and mechanisms at each stage.  This not only helps prevent trade secret cases but also facilitates the strongest and most effective legal claims if such a case unfortunately arises.

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