Many companies allow their employees to blog during work, or off work, about work, and work related issues.  Companies should be aware that their employees may be tempted to blog about subjects that include trade secrets.  For instance, on their own time, employees may blog about what they do at work, what they are inventing at work, who their company’s customers are, how the company attracts customers, and other proprietary and confidential information.  All of these subjects are potentially exposing the company’s trade secrets.  A company must take reasonable measures to protect disclosure of its trade secrets, and keep the trade secrets out of the public domain.  If a company fails to take reasonable measures to protect its trade secrets from exposure in the public domain, they will no longer be considered trade secrets. 

What can a company do to protect its trade secrets from blogging employees?

The simple answer is to create a blogging policy.  A policy should outline the parameters that employees must follow while blogging about the company, and should coincide with the company’s policy manual related to confidential and proprietary information.  The following items are suggestions to include in a company blogging policy. 

The policy should contain provisions that the employee shall not blog about proprietary and confidential information.  The company should provide a definition of proprietary and confidential information.

The policy should contain a provision requiring that the employee shall not post any obscene, defamatory, libelous, abusive or hateful remarks about any the company, company employees, company’s competitors, or company’s customers or partners.

The policy should contain a provision requiring the employee to gain permission from the company before using the company’s symbols, trademarks, or graphics. 

For employees who have personal blogs unrelated to the company, the company may want to incorporate a provision that requires the blogger to place a disclaimer on its blog, that all content is that of the author and does not reflect the views of the company.

The policy should not stifle creativity or treat the employee as though they cannot write about work-related topics, but must inform the employee about the legal boundaries of their actions related to blogging about trade secrets, and that the company must take reasonable steps to protect its trade secrets so that they do not lose their status as trade secrets.

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 A recent Seventh Circuit decision sends the clear message that companies should take precautions to secure their trade secrets by limiting the availability of the information to those who need to know it and by protecting information that is not readily available to the public.  Judge Posner delivered the opinion in American Family Mutual Insurance Co. v. Bonnie L. Roth, 2007 WL 1309403 (7th Cir. 2007).  The defendants had been insurance agents for the plaintiff.  The plaintiff was awarded a preliminary injunction against the defendants enjoining them from using trade secrets, including customer information that they stole upon their termination from the company.  The issues were governed by Wisconsin law, which has adopted the Uniform Trade Secrets Act.  The court found that the customer information was in fact a trade secret because the information derives independent economic value from sources not readily available, and is information that has been kept secret by reasonable means.  Specifically, the customer information was filtered based on their likelihood of buying insurance, and the information was only made available to agents who were assigned those specific customers or potential customers.  The court held that the plaintiff was entitled to an injunction because the information was clearly a trade secret under the Uniform Trade Secrets Act and Wisconsin law, but the court remanded to the district court so that the district court could rework the injunction to be more inclusive.  In the wake of Roth, it appears that the greater precautions a company takes, the greater the likelihood that an injunction will be granted to continue protecting the companies’ trade secrets.

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 Most protections afforded to intellectual property (IP) are available only after the property is in the public realm. For instance, trademarks must be used in commerce to identify products and services offered to consumers. Creators of original works generally must publish or register those works before they may enjoy any meaningful copyright protections. More significantly, prospective patent holders must not only submit their inventions to the scrutiny of the patent process, ultimately resulting in a publicly accessible record of every last detail concerning that invention's construction and use, they also must be willing to see their exclusive rights in that invention vanish upon the expiration of the patent. While patent holders do obtain a large measure of predicable certainty regarding the remedies they have available to protect their inventions, in many cases, the high cost (both substantive and procedural) of obtaining those protections may represent a poor investment, depending on the type of IP to be protected. In those cases, owners might find a more appropriate IP regime under trade secrets law.

In effect, a trade secret operates as a kind perpetual patent; the owner potentially can use the secret for his or her own commercial benefit forever. Moreover, almost anything can be a trade secret, while the availability of trademark, copyright or patent protection may be limited based on the nature of the IP at issue. However, "forever," with respect to trade secrets, may be roughly translated as: "for as long as you can keep it." Unlike with patents, where a fairly complex, federal statutory regime usually provides most of the protection afforded to patent holders, those who intend to protect their inventions as trade secrets must be willing to do more of the heavy lifting themselves, using, in the United States, two primary tools: state law and contracts.

Most states have enacted trade secrets legislation - usually modeled on the Uniform Trade Secrets Act - under which an owner of a trade secret may obtain injunctive relief to prevent another from misappropriating that secret by acquiring or using it without the owner's consent. The Trade Secrets Act also gives the owner the opportunity to seek civil damages arising out of such misappropriation, as well as attorney's fees. However, in many cases, an owner's resort to such statutory protection will represent a failure of the owner's front-line trade secrets defenses: his contracts and internal policies.

The key to effective trade secrets protection lies in addressing those secrets with a holistic set of internal policies regarding their use and with a well-crafted set of contractual agreements designed to restrict the ability of a third party to misappropriate them. Internally, access to the existence or details of a trade secret should be clearly limited by internal policies to only those employees who need to have such access, and those policies themselves must be crafted in such a way as not to attract unnecessary (or, sometimes, any) attention to the secrets they should be designed to protect. Moreover, a trade secrets owner must always be mindful of the extent to which any vendors or contractors or even customers are allowed to access those secrets, and it should include enforceable provisions in contracts with such parties to protect its interests. Finally, a trade secrets owner needs to include a comprehensive set of protections in its employment agreements, which should provide, within the bounds of what is permitted in the owner's jurisdiction, that work completed by employees in the course of their employment constitutes property of the employer and that those employees will remain bound to the terms of specified non-disclosure agreements and non-compete covenants during the course of, and for a period of time following, the term of their employment. What is and is not legally permissible with respect to such clauses usually varies from state to state.

It is worth noting that most of these same protections are good ideas for patent holders as much as they are for trade secrets owners. With trade secrets, though, while the owner must devote more vigilance to the implementation and enforcement of such protections, it need not  necessarily undertake the considerable initial expense to obtain the protection in the first place.

Whether it makes sense to construct a comprehensive trade secrets protection regime for your IP will depend on your willingness to commit to full implementation and enforcement, and that willingness may itself depend on the type of property at issue. If that property likely will become obsolete within the patent term (generally, 20 years) just by virtue of the market in which it competes, then it may make more sense to seek protection from other sources. If that is not the case, though, trade secrets protection could be the most appropriate means of protecting your IP.

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A federal district court has recently ruled that a plaintiff may not assert a claim for conversion of trade secrets.  Applying Texas law, the court in XPEL Technologies Corp. v. American Filter Film Distributors, Inc., 2008 WL 3540345 (W.D. Tex. 2008), held that a conversion claim may only be asserted when physical property is involved.  This holding is in conflict with a 21-year-old Texas appellate decision recognizing such a claim. 

 XPEL creates designs for headlamp protection and window film products for different models of cars.  Some of XPEL’s kits are delivered electronically through the company’s web-based proprietary software.  XPEL registered its Design Access Program 6.2 with the United States Copyright Office and required its users to assent to an End-User Licensing Agreement.  American Filter provides window film products and installation tools to professional window dealers, automotive dealerships, and others who install and sell window film.  XPEL contends that American Filter was intermittently using XPEL’s services to provide XPEL designs to its customers, that American Filter had software on its computers that could copy XPEL designs, and that American Filter used copied XPEL patterns without paying XPEL for such use.  XPEL filed suit against American Filter and other defendants for conversion, violations of the Lanham Act, copyright infringement, and other claims. 

American Filter moved to dismiss XPEL’s claims, including its conversion claim. XPEL’s conversion claim was based on American Filter’s alleged conversion of XPEL’s trade secrets.  American Filter argued that the conversion claim should be dismissed because such a claim will only lie for wrongful possession of the tangible embodiment of a work. 

The court dismissed XPEL’s claim for conversion under Texas law.  In doing so, the court noted that Texas conversion law “concerns only physical property.”  One Texas appellate court, however, has concluded that trade secrets may be subject to conversion.  See Chandler v. Mastercraft Dental Corp. of Texas, 739 S.W.2d 460, 469 (Tex. App. – Fort Worth 1987, writ denied).  The XPEL court concluded, however, that “Texas conversion law does not make a trade secrets exception to its physical property requirement.”  In reaching this determination, the court examined the elements of a conversion claim.  Among other things, a plaintiff asserting conversion must show that the defendant “assumed and exercised dominion and control over the property in an unlawful and unauthorized manner to the exclusion of and inconsistent with plaintiff’s rights.”  According to the court, “dominion and control” may only be exercised over physical property.  The Fifth Circuit may ultimately have to address how this decision may be reconciled with the Texas appellate decision in Chandler.

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Many businesses understandably want to prevent their employees from leaving their jobs and seeking employment with competitors. The reasons may vary, but the desire typically stems from concern regarding company secrets falling into the hands of those who could use them to do the most damage to the bottom line.  It is therefore common to see employment contracts that prohibit an employee either from competing directly with his or her former employer or from joining a competing company.

Courts always carefully construe these provisions. State laws are essentially unanimous in requiring that the provisions be reasonably limited, with their duration and scope – geographic and otherwise – narrowly tailored to protect the employer’s legitimate interests. Any ambiguity in such provisions almost always is construed against the employer, so employers must exercise considerable care in drafting them. In some states, however, non-compete clauses are even more particularly disfavored. For example, California law affirmatively prohibits “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind.” (Cal. Bus. & Prof. Code § 16600) In addition, courts construing the California law have made it clear that the statute applies not only to “traditional” non-compete clauses that expressly restrain an employee from engaging in competitive activities following termination, but also to differently structured provisions that have substantially the same effect as an express prohibition.

A recent example is found in the opinion of the U.S. District Court in the Northern District of California in the case of Applied Materials, Inc. v. Advanced Micro-Fabrication Equipment (Shanghai) Co. (May 20, 2009). There, the employer, Applied Materials, had attempted to enforce the following patent assignment clause against former employees and their new employer:

In case any invention is described in a patent application or is disclosed to third parties by me within one (1) year after terminating my employment with APPLIED, it is to be presumed that the invention was conceived or made during the period of my employment for APPLIED, and the invention will be assigned to APPLIED as provided by this Agreement, provided it relates to my work with APPLIED or any of its subsidiaries.

In defending the clause, Applied Materials argued that the clause merely created a presumption that a former employee would have the opportunity to rebut in order to avoid an assignment. However, the court disagreed, noting that the provision “does not state that an employee may rebut this presumption, nor does it state how an employee would do so.” The court further held that because the clause “touches post-employment inventions, regardless of when they were conceived or whether they were based on Applied's confidential information, [it] necessarily operates as a restriction on employee mobility.” As a result, the court determined the clause to be unlawful and void under California law and incapable of reformation.

Cases such as Applied Materials emphasize the point that, regardless of the jurisdictions in which they are located, companies need to look to various kinds of measures to protect their trade secrets and should not rely solely or even substantially on non-compete clauses. California businesses have a special burden to overcome, but even businesses in states that allow non-compete clauses must be wary of the scrutiny to which such provisions are subject. It is important to consult with counsel to identify and implement a holistic and diverse regime of trade secret protections.

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