Avoid Liability for Intellectual Property Misappropriation with Contingent Workers | DCR Workforce Blog

Avoid Liability for Intellectual Property Misappropriation with Contingent Workers

intellectual PropertyRecently, we issued a Request for Proposal (RFP) for staff augmentation services on behalf of one of our clients. After reviewing all responses, we narrowed down the list of potential suppliers, and invited each to present their capabilities. In response to our request to describe a certain process, three of the potential vendors showed us an identical slide! This prompted today’s blog on intellectual property misappropriation.

Businesses need to be cautious about losing their trade secrets and intellectual property to competitors when workers change jobs or assignments and go to work for their competition. In most cases, employees stay within an industry when changing positions. Intellectual property and trade secrets stand to get compromised, as these workers may inadvertently or deliberately share proprietary information in the course of their duties. So, companies may lose their trade secrets or get blamed for infringing upon a competitor’s trade secrets and be sued for aiding and abetting a criminal breach of trust.

Depending upon the State in which they operate, businesses may establish post-termination restrictions on employees including non-competition agreements, provided the law does not render them void. When dealing with agency-supplied contractors, on assignment for short durations, this approach is not feasible. The worker is not “employed” by the host company. In addition, even when companies attempt to impose related restrictions on their staffing suppliers, federal and state laws are unlikely to support any company attempting to restrict the ability of a temporary worker to find future employment. We believe that companies should look elsewhere for protection. In fact, there is absolutely no better way to protect trade secrets than setting up effective onboarding and offboarding practices.

When Onboarding any New Worker:

  • Explain the importance of keeping access cards, passwords, encryption systems, and electronic devices safe to ensure the confidentiality of company’s information.
  • Ask workers to protect the company’s information at all times, and be aware of other listeners and eavesdroppers (and hackers) who could listen in – unless due care is exercised to avoid it.
  • Explain the significance of the various clauses in the trade secret protection agreement they sign. Be explicit in discussing the type of information that cannot be shared and provide a readily available resource who can provide guidance in situations where workers are unsure of whether information is proprietary. Establish a policy to periodically re-train the workers on protecting trade secrets and confidential information.
  • If a new worker has worked for a competitor, be clear as to the type of information that should not be shared with you. Remind the worker to not share presentations, internal memos, client case studies, or any other information that is not in the public domain. .
  • Keep tabs on the new employee’s work for a while to make sure that they are not using information which is proprietary to a previous employer to achieve results, or saved any data pertaining to them on your company’s computers.

With an Applicant who works/worked for or with a Competitor:

  • When interviewing someone who works with or worked for your competition, caution the individual at the outset to not reveal any confidential information pertaining to the earlier employer.
  • Make it clear to the applicant that you are interested only in the general skills and knowledge they obtained while working for the earlier employer; not their confidential information and trade practices.
  • You may explicitly explain to the applicant that they cannot show any of their employer’s property, trade secrets or confidential information or entice other former co-workers to switch jobs.
  • Obtain all employment agreements entered into by the candidate with the earlier employer and review them thoroughly for any possible legal issues with hiring a particular candidate, and make the offer conditionally on ruling out possible risks and legal implications.

With Exiting Workers:

  • Ensure that the employee returns all access cards to company premises at different locations, all electronic devices, and hard copies of documents; verify that all electronic access has been terminated.
  • Make sure you review your policy on protection of the company’s trade secrets and confidential information in the exit interview.
  • Make the worker confirm in writing that he or she understands the obligation to protect your information and does not possess or retain any confidential information, proprietary material, documents, phones, computers, tablets and other equipment or anything which carries trade secrets belonging to you. This obligation extends to social media accounts used for company’s marketing and image building purposes and any other innovative uses made of technological advances.

As Albert Einstein said, “Imagination is more important than knowledge” and it is important for a company to protect its innovations and creativity from others who would deprive them of their competitive advantage. But then, they also have the duty to not encroach upon others’ property too, inadvertently or by design.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.