Trade secrets are protected under state law. The misappropriation or unauthorized disclosure of trade secrets can have significant legal ramifications for both the individual disclosing the secrets and the company whose secrets are being disclosed. Care must be taken during the hiring process when a company might inadvertently give away a trade secret to a prospective employee.
Potential Harm Of Giving Away Trade Secrets During The Hiring Process
- Legal Ramifications: The Uniform Trade Secrets Act (UTSA) is a model law adopted by many states, including Pennsylvania, which provides legal recourse for companies whose trade secrets have been misappropriated. If an individual discloses a company’s trade secrets during the hiring process without authorization, they could be liable for misappropriation under state law.
- Breach of Confidentiality Agreements: Many companies require employees to sign confidentiality or non-disclosure agreements (NDAs) as a condition of employment. By disclosing trade secrets during the hiring process, an individual may be violating these agreements, leading to potential legal action by the company.
- Loss of Competitive Advantage: Trade secrets are valuable assets that give companies a competitive edge. If an employer or employee discloses trade secrets to competitors or the public, it can lessen the company’s competitive advantage and undermine its position in the market.
- Financial Loss: The unauthorized disclosure of trade secrets can result in financial loss for the company. This loss may occur due to decreased market share, customer loss, or the need to invest resources in developing new proprietary information to replace the compromised trade secrets.
- Reputational Damage: Companies rely on their reputation and trustworthiness to attract customers, investors, and employees. If an employer or employee discloses a company’s trade secrets during the hiring process, it can damage its reputation and erode stakeholder trust.
- Legal Costs: Defending against trade secret misappropriation can be costly for companies. Legal fees, court costs, and potential damages awarded to the plaintiff can add up quickly and strain the company’s finances.
- Diminished Employee Morale: Employees who witness trade secret misappropriation may experience diminished morale and trust in their employer. Decreased trust can lead to increased turnover and reduced productivity, further impacting the company’s bottom line.
- Stall in Innovation: Trade secrets often involve innovative processes, technologies, or information that companies have developed through significant investment of time and resources. When trade secrets are disclosed, companies may become more hesitant to innovate and create new proprietary information, fearing it will be compromised.
Given these potential harms, companies and individuals must understand the importance of protecting trade secrets during the hiring process. Companies should safeguard their confidential information through appropriate policies, agreements, and security measures, while individuals should refrain from disclosing sensitive information without proper authorization.
Takeaway
If either employer or employee has compromised trade secrets, steps must be taken to rectify or minimize the damage done. Jones Gregg Creehan & Gerace has experienced attorneys who can assist you if issues with your business have arisen and you need to take action to remedy the situation. Contact our office for an initial consultation.