Let’s say you beefed up your cybersecurity protections and protocols with your employees now working from home. Kudos to you for being ahead of the curve. This has helped preserve the confidentiality of your trade secrets. But it has also alerted you to the unauthorized downloading of customer lists and training materials by an employee who just resigned and appears poised to begin competing against you. Perhaps you have heard that courthouses around your area have closed or offer limited services and have seemingly placed every civil case – and the emergency relief they can afford – on the backburner. What do you do? In our present COVID-19 reality, you may feel as though you are powerless to enforce your rights. But there are many actions you can take now to preserve your claims and the evidence that supports them.
Interview Colleagues and Search Social Media
Chances are that if the employee stole intel to compete against you, the employee did not leave quietly. Talk with the ex-employee’s coworkers and find out if the employee sent any text messages or emails or otherwise left a digital footprint concerning the employee’s intentions. Keep in mind that the ex-employee will likely target one or more of your existing employees to join him or her in the new venture. Also monitor those clients with whom the ex-employee had direct contact. Look for any decrease in business from these customers and track accordingly. Your efforts to calculate lost revenues and profits now will lead to less time and expense in having an expert do it for you.
Send a Cease and Desist Letter
At its core, a cease and desist letter puts a wrongdoer on notice that you are aware of your rights and are not afraid to enforce them. To that end, an effective cease and desist letter should accomplish several things: (1) identify the general nature of the trade secret stolen without disclosing its exact nature; (2) describe the theft and demand that its use stop immediately; (3) request that the employee abide by all post-termination restrictions and covenants; (4) avoid making conclusory and potentially defamatory statements; (5) demand return of the secrets and invite non-litigious resolution while reserving all rights; and (6) provide a deadline to respond. Following this checklist should either lead to a mutually beneficial resolution that saves significant legal expenses, or it will preserve your rights and lay the groundwork for potentially greater damages awarded should filing a lawsuit become necessary.
Hire a Third-Party Forensic IT Consultant
Narrowing down the vast amount of data to find the actual theft or series of thefts can often prove to be a technological nightmare. A forensic IT consultant, however, can quickly find digital clues after seizing and imaging the ex-employee’s device(s). Clues such as USB history, cloud storage, emails, browser history, and text messages (to name a few) can all be combed for valuable information. These sources can tell you what documents were downloaded, where files were saved, and with whom files were shared – but only if you know where to look. The consultant can also construct a timeline of events and potentially serve as an effective expert witness if litigation ultimately ensues.
Forum Shop if Necessary
Given the recent pandemic, courts everywhere have adopted different approaches to handling emergency relief such as motions for temporary restraining orders. Some do not see them as posing sufficient exigent circumstances to warrant an in-person hearing. Others may have the technological resources and know-how to conduct such hearings virtually. If there is a legitimate basis to file in a different forum than the one in which you are most accustomed based on the relief available, you should not hesitate to seek such relief when appropriate.
Stipulated Injunctions and Expedited Discovery
Where the former employee has immediately begun competing in clear violation of a restrictive covenant, particularly for an established competitor, it saves considerable time and expense for the parties to jointly enter into a TRO and/or preliminary injunction. This allows you to engage in faster discovery production with your former employee and the new employer without worrying that your trade secrets will continue to be used against you during the pendency of the case. And if you learn that your trade secret(s) continue to be misappropriated, most judges will be more inclined to take a more proactive role in your claims if the judge believes that the court’s orders are not being followed.
Consider Contacting Law Enforcement
If the theft of trade secret information rises to a major crime, it may be prudent to contact state and/or federal law enforcement agencies. At the federal level, the Department of Justice has partnered more recently with the National Intellectual Property Rights Coordination Center (NIPRCC) to combat this type of white-collar crime more effectively. NIPRCC devotes significant resources to operations that target everything from counterfeit goods to internet crime. Filing a report with law enforcement will document the theft and may make it more problematic for the employee to use the information against you. A guide for how to report intellectual property crime can be found here: https://www.justice.gov/criminal-ccips/file/891011/download.
Remember that confidential information can apply to a wide variety of information provided that the same is stored securely and derives independent value for the company. Trade secrets can be broken down into many types (e.g., business relationships and strategies, designs, financials, methods, products, marketing plans, etc.). The use or disclosure of any type of confidential information can be extremely harmful and is worth protecting.
Hope is not a plan, neither is complacency. If you find yourself at a loss or would like reassurance as to the right approach to combat the harmful acts of a rogue ex-employee, we are here to help. Consult a trusted attorney to determine what reasonable steps fit best with your company.