Make a forensic copy of an employee’s laptop immediately after they leave for a competitor to preserve evidence in case you suspect there’s been a misappropriation of trade secrets, Venable attorney Thomas Wallerstein says.
“A lot of trade secret litigation comes down to IT data analysis,” Wallerstein told Legal Dive. “You really should basically freeze the laptop – put it in storage for some period of time until you’re certain the person’s okay. Because every time you boot a computer, you change the metadata. So, before you even turn it on, you want to make an image of it, and then you always have the way it was on that last day and no one can ever say, ‘Oh, this was gone, that was gone.’”
States are increasingly following California’s lead and passing laws prohibiting companies from issuing employees non-compete agreements, so going after a former employee that you believe has taken company data requires you to approach it from a different standpoint.
“Every trade secret defendant says, ‘You’re just trying to stop me from competing and that’s not even legal,’” Wallerstein said.
But the issue isn’t non-competition; it’s trade secrets misappropriation. “It’s all part of employee mobility litigation,” he said.
The pandemic has arguably fueled employee mobility litigation because remote work has made it easier for employees to take data while at the same time weakening their company loyalty.
“The social connection to their employer and colleagues has lessened,” he said.
At the same time, general counsel are more likely to pursue a case since passage of the Defend Trade Secrets Act in 2016, which gives companies a uniform private right of action in federal court.
Deep pockets
General counsel at companies that are on the hiring side need to be as careful as the former company’s legal chief. Any company that accepts a new employee who later is charged with a trade secret violation will be a party to the suit, even if they didn’t know about it.
“Companies that are completely innocent can still be caught up in misappropriation,” Wallerstein said. “If material gets put on the company server or even incorporated into the company’s products or services, the plaintiff company virtually always sues the new company along with their former employee. They have the deep pockets to pay.”
The key for the new company is to have language in its employment agreement, or its own non-disclosure agreement, prohibiting the new-hire from bringing in data from the previous company.
“When you hire them, give them an agreement that says, ‘You may not bring any other company's trade secrets into our company,’” he said.
The language doesn’t have to be complicated; most standard agreements have language that’s adequate as long as they take into account any specific provisions required by the state.
The bigger issue is enforcement. Where companies often fall down, Wallerstein said, is getting the agreements signed and tracked through the length of the person’s employment.
“Frequently when a big company gets involved in litigation, they don’t have this or that paperwork,” he said. “There’s no magic language. It’s just important to vigorously enforce it and keep the paperwork.”
Data movement
For the former company, successful prosecution will often come down to its ability to capture the digital trail the employee leaves as he’s preparing to leave.
“The days and weeks or sometimes hours before the last day when they resign, they send an email to their Gmail that’s got attachments of company stuff or they put it in a thumb drive or portable hard drive,” Wallerstein said. “Or there’s iCloud or Dropbox involved. There’s something to do with data being moved from the company to somewhere it’s not supposed to be. The definition of trade secret is pretty restricted. It’s generally tangible electronic data.”
That’s why getting the forensic image of the laptop before it's recycled and turned over to another employee is so important. “That’s the best practice,” he said.
