Litigation is rarely a substitute for good advance planning. Clearly, if all employees were bound by valid and enforceable non-competition agreements, there would be little need for lawyers. Where, however, such an agreement does not exist, it is not too late for the employer to take action.

An employer can take action once it finds out that its trade secrets are about to walk out the door. Litigation should not be the first resort. There are steps that the employer can take in the course of a well-planned exit interview that will minimise the risk that the employee will use or disclose trade secrets to the new employer.

If, after the exit interview, the employer cannot get comfort that its trade secrets are safe in the hands of the employee, litigation may be the only alternative, and an injunction the only effective remedy. It is by no means a simple matter for the former employer to obtain an injunction to restrain competition by a former employee, even when highly valuable trade secrets are in issue.

Exit interview

Regardless of any other arrangements that an employer has with the departing employee, whenever an employee has used or had access to confidential information or trade secrets in the course of employment, the employer should conduct an exit interview with the employee to remind the employee of his or her obligations with respect to that information. Beyond merely reminding the employee that the employee may be bound by a non-competition agreement, a non-disclosure covenant, or by common law duties of confidence, however, the exit interview affords an opportunity to have the employee acknowledge that she has taken positive steps to protect the employer's information.

When dealing with an honest employee, a thorough exit interview provides a useful checklist for both the employer and the employee to protect themselves from future misunderstandings. With a dishonest employee, the exit interview neutralises defences to legal action based on claims that the employee did not realise that she had the information or that she did not know that the company considered the information to be proprietary.

Exit Interview Confirmations

At the exit interview, a diligent employer will seek confirmation of the following from the departing employee:

That the employee has returned to the company all documents and destroyed all electronic copies of any documents that contain employer trade secrets or confidential information. The employer should be as specific as possible in describing the documents and classes of documents covered by this acknowledgement.
That the employee has not retained copies of any trade secrets or confidential information on his or her home computer or on any portable computer or other device.
That the employee understands the extent of the information that the company considers to be trade secret or confidential.
That the employee has delivered to his or her former supervisor all customer contact information—whether in hard copy or electronic form—and that the employee has not retained a copy of that information.

If the employee is unwilling to provide this confirmation, a note should be made of the refusal, as the refusal to provide the confirmation may be a relevant factor in assessing the likelihood of misuse of trade secrets at the new employer's business.
If there are reasons to suspect the employee has taken a record of confidential information, some steps can be taken quickly to determine whether the suspicion is well founded and whether the employee should be confronted at the interview. The employee's computer, and if appropriate, other computers to which the employee had access, should be checked to determine if they were used to download information in the period leading up to the resignation. Photocopy logs can indicate unusual amounts of copying at odd hours. Building access logs and security videotape can also disclose whether the employee was on site at unusual hours.

It is important to ensure that departing employees understand the full scope of their obligations. To avoid misunderstandings, at the exit interview the employer should give the employee copies of all agreements or other undertakings the employee gave at the outset or during the course of employment that set out obligations with respect to confidential information. If the employee is subject to company policies with respect to confidential information or trade secrets, copies of the relevant policies should also be provided.

At the same time, the departing employee should also expressly be invited to contact a designated person at the company if the employee has any questions in the future about the nature or scope of his or her obligations with respect to trade secrets.
Often overlooked in the exit interview, particularly with technical employees, are issues concerning protection of rights to intellectual property that the employee may have worked on in the course of employment. A lack of clarity over the ownership of rights to inventions made in the course of employment can lead to thorny issues later. It is not good enough for the employer to have the employee renounce any rights to inventions that may have been made in the course of employment. Subject to certain limited rights of amendment, a patent that fails to name all of the actual inventors of the claimed invention may be invalid.

Recording

From a litigation perspective, it is not enough to conduct an exit interview; there must be some record of it. A practice that is gaining popularity is to have the departing employee complete a written questionnaire in advance of an oral interview. In some cases, employees are asked to complete an electronic survey. In addition to standard human resources matters, employees are being asked to describe:

Why they are leaving;
W ho their new employer is; and
How the responsibilities at the new job relate to the job they are leaving.

This information can be useful, particularly if the employee is less than candid in the responses. Notes should be taken during the exit interview and, if possible, the departing employee should be asked to confirm that the notes accurately reflect what was discussed. Having a second person attend on behalf of the employer can help with proof if disputes later arise as to what was said. When the exit interview is complete, extracts from the notes of the meeting or from the questionnaire can be sent to the successor employer. It is not uncommon, particularly in the high tech sector, for the employment contract of a new employee to contain self-serving statements to the effect that the company forbids the employee from using or bringing onto the premises any confidential information or trade secret from any former employer.

For example, one fairly common clause is:

Former Employer Information: I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that I will not bring onto the premises of the Company any unpublished document or proprietary information belonging to such employer, person or entity unless consented to in writing by such employer, person or entity.

While the courts are largely unsympathetic to new employers who point to this clause as evidence of their due diligence, if the former employer has put the new employer on notice of the specific type of information that the employee has, this clause takes on a different character. It can now be turned on the new employer to convince the new employer to fire the dishonest employee if that information turns up in the hands of the new employer.

An employer that can demonstrate to the departing employee that it has taken all of these steps may well find that the employee will take confidentiality obligations seriously and, at a minimum, will not misuse trade secrets because of a failure to appreciate his or her obligations.

Due to the fact-specific nature of cases in the trade secrets area, greater comfort comes from thorough preparation before the employee leaves than from reacting when problems arise. When the worst happens, however, a careful employer faced with a dishonest former employee is not without a remedy. But the court is a public forum. To explain fully the danger of the disclosure of trade secrets to the court will usually require an explanation of what the trade secrets are, which makes much of the exercise seem pointless. It is not a trade secret if in the public domain.