In the world of government contracting, classified information isn’t the only thing employees are expected to protect. Trade secrets – also known as “intellectual property,” “proprietary information,” or, for you cooks out there, “secret sauce” – are vital to a company’s financial success and jealously guarded. Unfortunately, employees sometimes get themselves into trouble by not realizing what actually constitutes a trade secret. When that happens, lawsuits and security clearance problems can follow.
NON-DISCLOSURE AGREEMENTS
Most government contractors working with proprietary information require employees to sign a non-disclosure agreement (NDA) that outlines what the employer considers to be protected trade secrets. (Whether or not the information actually does constitute trade secrets is an entirely different matter). This NDA is similar to that which the government requires for access to classified information. But beware: the fact that you did not sign an NDA does not necessarily mean you are off-the-hook legally for protecting trade secrets. What is considered protected, proprietary information can vary from state to state and include everything from the process by which an aircraft component is assembled to the company’s supplier list. The central question is often this: how closely does the company guard the secret?
PATENTS VS. TRADE SECRETS
One frequent misconception is that in order to be considered a trade secret the information, design, or process in question must be patented. In fact, trade secrets and patents are two entirely different designations. For a patent to issue, the item, design, or process is submitted for review by the U.S. Patent and Trademark Office. Once that happens (and assuming the submission is patentable), the patent issues and protects the holder from any subsequent infringement by competitors. The problem with patents is that the submissions become public record. This is the reason why Coca-Cola and Pepsi have never patented their secret formulas. Instead, they have designated the formulas as trade secrets – which effectively offers them the same protection as a patent, provided no one else independently manages to create the exact same formula.
The same idea applies in the government contracting world. Perhaps your employer discovered an innovative new way to deliver a service to the government that cuts costs by 20%, thus making their bid submissions that much more competitive. If you learn that information and then leave for a better job at a competitor, I strongly suggest going out of your way to avoid even the appearance that you are sharing that information with the new employer. Start by checking your resume to ensure you are not sharing or referencing trade secrets there.
WHY YOU SHOULD CARE
Understandably, all of this is counter-intuitive to many people. It would no doubt seem natural (indeed, a selling point) for you to take what you learned at your former employer and apply it to work at your new employer. That’s the stuff that promotions are made of, right? Doing so, however, not only opens you up to a theft of trade secret lawsuit, it also exposes your new employer to the same. Savvy employers actually discuss this issue with new employees and include a relevant training session (also called a “forget whatever you learned while working previously for our competitors” program) in the onboarding process.
Finally, understand that the government views theft of trade secrets as a serious charge. More insidious cases can actually be criminally prosecuted as “industrial espionage” and result in prison time. More likely, however, will be that the former employer files a complaint about you with the government agency that issued your security clearance. The issue is then categorized as dishonesty and can result in a security clearance revocation. I’ve seen it happen twice.
The bottom line is that intellectual property matters can be legal minefields. What does and doesn’t constitute a protected trade secret is sometimes a matter of debate, even for attorneys. What is clear, however, is that erring on the side of caution – along with seeking competent legal advice, where necessary – is generally the best practice.
This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.
