Restrictive Covenants Are the Most Effective Trade Secret Protection
January 7, 2020
A restrictive covenant that addresses the competitive activities of an employee both during and after the employment relationship is a necessary tool for protecting a company’s trade secrets, according to attorney Chip Collins, writing in IPWatchdog. He suggests key provisions to consider. Chief among them are confidentiality clauses that prohibit the use or disclosure by employees of a company’s confidential information both during and after the term of employment. Noncompetes are the most controversial of restrictive covenants, but the most effective at preventing unfair use of trade secrets. They prohibit a former employee from competing within a specified geographic area for a specified period of time (usually 1-2 years). They are especially useful because it is usually easier to prove that an employee is working for a competitor in a restricted area than it is to show that he or she stole trade secrets. State law governing noncompetes varies widely, and California and North Dakota don’t allow them at all. Additionally, there’s a recent trend of state legislation limiting and regulating their use. A provision that should be in every employee agreement is the “return of materials” clause requiring a departing employee to return or delete all records, property or information obtained or created in the course of employment, regardless of whether the information is confidential or not. The enforcement of these clauses is relatively easy because there’s no need to prove that the information qualifies as a trade secret or was even used.
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