Everyone has heard intellectual property horror stories. They usually follow the same plot lines. A successful salesperson leaves his long-time employer with a customer list only to start using it to sell similar services elsewhere. Or a brilliant IT staffer begins developing a product that builds on his former company's proprietary technology. Or a disgruntled employee sells trade secrets to the competition after getting fired.

These scenarios happen every day, and when they do occur, many businesses are helpless to fight against the brain drain because they haven't taken the necessary legal and procedural precautions. If done correctly, taking the right steps can not only give you the upper hand in the case of a court battle, it may also be a deterrent for errant employees to walk the straight and narrow in the first place.



Copyright Protection

In most companies, the IT department holds the position of not only protecting a business' biggest asset—information—but also of being a major producer of intellectual property. If your team does create special proprietary technology, such as custom software, it is important to get copyright protection quickly into place.

Some IT folks may scoff at this, pointing to the default copyright protections that a business has over its IP without having to take any action. But attorney Jonathan Paul of The Tech Law Group in San Diego, Calif., says that this level of protection isn't enough for most businesses.

"It gives you the added enforcement provisions," he says of the extra copyright protection. "That way you can get damages awarded in court without having to prove the extent of your damages. With copyright protection you've got mandated damages up to 10,000 per instance of infringement." Paul says that oftentimes just having the threat of such damages is enough to get the individual in question to stop infringing.



Nondisclosure Agreements

One of the most important tools against IP theft is the nondisclosure agreement. Most lawyers agree that every company that has trade secrets, proprietary information, or any other intellectual property to protect needs to get everyone to sign an NDA.

"Getting a nondisclosure is critical," Paul says. "Even in your interviewing process, if you are showing prospects around, you should probably get them to sign an NDA."

But the precautions shouldn't stop there, says Jon Light of law firm Nordman, Cormany, Hair & Compton in Oxnard, Calif. In order to be truly protected, you also need the right security procedures in place. If you don't, your claims in court against stolen secrets will never hold water.

"A company needs to take precautions to to ensure that intellectual property has been maintained as a trade secret," Light says. "If you go to court to get an injunction to prevent someone from using your material, the court is going to first ask you how you went about protecting that information."

Most security-conscious companies should be able to provide evidence of protection. This can be as simple as tracking access to the information and limiting access with some form of password authentication or key card access, something that most companies should be doing anyway.



Noncompete & Nonsolicitation Agreements

Noncompete and nonsolicitation agreements are sometimes not as ironclad as most companies would hope. "Noncompetes are enforceable in some states and not in others," Light says. "Nonsolicitations are also enforceable only to an extent in some states."

A noncompetition agreement will keep an employee from working at a competing company (within specified geographical or industry boundaries) for a set period of time after leaving the former employer. The nonsolicitation agreement will prevent a former employee from soliciting his employer's customers after leaving the company.

Even if they may sometimes have limited enforcement in some states, such as California where Light practices, they can still be useful documents to have workers sign, if only for deterrent purposes. And should your employees ever choose to use your own IP against you, these documents may not be useful by themselves, but they can help prove to the court that you have made every effort to protect yourself.

Get A Lawyer

In this day and age of revolving employment doors, smart businesses have even the most loyal employees sign a number of legal documents that state that they won't rob the company blind. This is doubly important for IT employees, who usually have the most access to intellectual property outside of the C-suite.

In order to prevent the theft of your business' most valuable asset—information—Light says it is important not to skimp on front-end preparations. Getting a lawyer to help draft the necessary documents can help prevent catastrophes when an IP struggle does arise.

Beyond the standard agreements, a lawyer may help you draft clauses into your IP legal documents that can give added protection against situations you may not have thought of in the first place. For example, some companies can be open to lawsuits for IP theft without even knowing it if a new employee brings trade secrets with him from another company.

"You need to have them promise in the employment agreement that they aren't bringing anything that is a trade secret with them," Paul says. "That is a clause you want to get in."

Also, you may have some members of IT staff that have developed their own personal IP before joining the company. Light suggests that companies always list what an employee is already bringing to the table in their personalized documents.

What it all boils down to is ensuring that you are properly covered no matter what the situation is. "Sometimes I'll get something that is clearly homemade," Light says. "But in the end, the company is not protected because the document doesn't have sufficient bells and whistles to hold up in court."

by Ericka Chickowski