restrictive covenants, confidentiality agreements, and trade secrets
TRANSCRIPT
Restrictive Covenants, Confidentiality Agreements, and Trade Secrets
Restrictive Covenants, Confidentiality Agreements, and Trade Secrets
Restrictive CovenantsRestrictive Covenants• Restrictive covenants are contractual
agreements that aim to protect employer interests by limiting the ability of former employees to do such things as:– going to work for competitors – disclosing trade secrets or other sensitive
information– soliciting clients or former coworkers to
do business with or join other firms – making disparaging comments about their
former employers • The increasing use of restrictive
covenants to constrain the activities of former employees raises important legal and public policy questions.
Noncompetition AgreementsNoncompetition Agreements
• Noncompetition agreements are designed to prohibit former employees from working for competitors.
• The extent to which such agreements are enforceable varies considerably from state to state.
• Courts recognize such agreements as restraints on trade and will enforce them only to the extent that the restraint is necessary to protect legitimate business interests.
• Rule: Employers should use noncompetition agreements only if important business interests are at stake, and should craft the agreements to be no broader than necessary to protect those important business interests.
• Covenants not to compete– Limited as to duration or geographic
area– Based on some good consideration– Reasonable and not interfere with
interests of the public
• Rule: Employers should use noncompetition agreements only if important business interests are at stake, and should craft the agreements to be no broader than necessary to protect those important business interests.
Georgia Restrictive Covenant LawGeorgia Restrictive Covenant Law
• Major changes effective 1/1/11.• Previously, Georgia was a "no-blue pencil"
state• New Act
– Modification of Overbroad Provisions– No Temporal Restriction for Non-disclosure
Provision– Broadening a Non-solicitation of Customers
Provision– Non-compete Agreements Apply to a More Defined
Group of Employees
Other ProvisionsOther Provisions• Nonsolicitation agreements prevent
former employees from soliciting the firm’s clients after the employee leaves.– Some courts give employers more
leeway in using these agreements because they impose a lesser restriction on the employee’s ability to earn a living.
• Trade secret refers to information that has actual or potential economic value because it is not generally known to others and the owner makes reasonable efforts to keep this information secret.– Courts have traditionally recognized
a duty of employees under common law not to divulge such information.
Trade SecretTrade Secret
• Form Of Information
• Owner Works To Keep Secret
• Economic Value Derived From Secrecy
• Theft = Misappropriation
x
Georgia Trade Secrets Act O.C.G.A. § § 10-1-760 through 10-1-767
Georgia Trade Secrets Act O.C.G.A. § § 10-1-760 through 10-1-767
• Theft of Trade Secrets– Any form of information– Owner works to keep secret– Economic value derived from
secrecy– Examples: customer lists,
marketing plans, research results, formulas & designs
• Uniform Trade Secrets Act
Camp Creek Hospitality v. Sheraton Franchise Corp.Camp Creek Hospitality v. Sheraton Franchise Corp.
• Hotel’s occupancy levels, average daily room rate, discounting policies, long-term contracts, & operating expenses.
Leo Publications, Inc. v. ReidLeo Publications, Inc. v. Reid
• A publication’s list of advertisers, which included the size & frequency of their advertisements.
Reasonable Efforts to Maintain Secrecy Reasonable Efforts to Maintain Secrecy
• Limit access to those who need to know• Keep sensitive information under lock and
key• Password protect electronic files regularly
remind employees that information is secret• Stamp information as “Secret” or
“Confidential.”• Prohibit or limit copying of confidential
information.
RemediesRemedies
• Injunction• Damages• Punitive damages & attorney’s
fees for ”willful and malicious” misappropriation.
Confidentiality AgreementsConfidentiality Agreements
• Confidential information (broader than trade secrets)– Employer’s property & peculiar to
employer’s property– Disclosure or use must cause injury– Information must possess an
element of secrecy peculiar to the employer
• Must be limited to reasonable time
Other Provisions Other Provisions
• Nondisparagement clauses prevent employer and employee from saying negative or critical things about one another
• Nondisparagement clauses are now commonly included in severance agreements.