Companies concerned about protecting their trade secrets have two vehicles at their disposal. They can look to the "Maryland Uniform Trade Secrets Act" (the "Act") or have employees sign nondisclosure agreements. Companies can choose to utilize one or both options, depending upon their circumstances.
The Act provides that "actual or threatened misappropriation [of a Trade Secret] may be enjoined." Misappropriation means acquisition of a trade secret by one who knows, or has reason to know, that the trade secret was acquired by theft, bribery, breach, or some other improper means, or the disclosure of a trade secret of another without express or implied consent. The Act also provides for damages, including actual loss incurred by a company due to improper disclosure of its trade secrets and, in the proper case, attorneys' fees.
The Act defines a "trade secret" as follows:. . . information, including formula, pattern, compilation, device, method, technique, or process that: (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
To avail itself of the remedies available under the Act, a company must take reasonable measures to maintain the secrecy of its trade secrets. To do this, a company should take the following steps: (1) identify the secrets it desires to protect, (2) give notice to employees that this information is to be kept confidential during the employment relationship, and after the employment relationship terminates, and (3) inform departing employees that the information must remain confidential. This is best done during an exit interview. The employee should sign a written statement verifying that the issue was discussed, and that the employee knows that the information may not be used or disclosed outside the company.
Another way to protect a Company's trade secrets from disclosure is to have employees who have access to such information, or to whom such information may be disclosed, sign a non-disclosure agreement. The advantages of a written agreement are that it sets forth exactly what the Company expects of its employees in connection with non-disclosure of confidential information, defines what is a trade secret, provides broader damages and remedies, and is tailored specifically to that Company's needs.
If current employees are requested to sign such a non-disclosure agreement, however, the main disadvantage is that it must be supported by consideration. Continued employment after entering into the agreement is sufficient consideration. The problem, however, is when a current employee refuses to sign the agreement. Employees must be told that if they refuse to sign the agreement, their employment will be terminated. In the event that an employee refuses to sign the agreement, however, his employment must be terminated, or the consideration will fail and the contract is unenforceable. Further, terminating an employee shortly after signing such an agreement may cause the consideration to fail. Another disadvantage is the potential effect on employee morale. Employees may take it as a sign that you don't trust them, or resent the Company's attempts to control them after the employment relationship terminates.
If a Company is not prepared to terminate the employment of a current employee who refuses to sign a nondisclosure an agreement, it should have newly hired employees sign a nondisclosure agreement, and implement the procedures identified above to avail itself of the remedies available under the Act.