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Planning for International Trade Secret Protection

By Jon J. Olafson

Your company has worked hard to ensure that its trade secrets are protected under the applicable state laws, and modified its contracts and policies to reflect the new federal trade secret protection standards. When your company has grown internationally, what happens then to trade secret protection? What can your company do to ensure that secrets fundamental to your business remain protected, even internationally?

The answer is both complicated and surprisingly simple. There are various international treaties as well as individual national (and sometimes regional) laws that are implicated. For the purpose of this blog, we will focus on strategies for developing a trade secret protection program that takes into consideration commonalities found in trade secrets laws throughout Asia and Europe. 

Of course, each country has its own laws, and each contains certain nuances that your company will want to address when implementing country-specific protection programs. Companies are advised to seek counsel on the application of each country’s specific trade secret laws as well as the applicability of any treaties. For purposes of developing a baseline trade secret protection policy, many of the country-specific laws have some similarities, which will help a U.S. company looking to expand internationally to protect their trade secrets. Here are three commonalities expanding companies should consider when drafting trade secret protection program:

  1. Agreements. Many countries around the world value agreements between parties and employees that establish the expectations regarding the protection of the company’s trade secrets. Generally, the agreement should include a clear identification of the applicable trade secrets, the specific confidentiality expectations, and the penalty for wrongful disclosure. While each country may have their own contractual standards and the weight given to a non-disclosure agreement, a clear description of the expectations of each party is generally valued. 
  2. Employment Policies. If a U.S. corporation has employees in another country, the company should have employment policies related to the protection of trade secrets. The protective policy should clearly delineate the trade secret and confidential information, the expectations the company has in regard to the protection of its trade secrets, and the role employees play in protecting the trade secrets, during and after the termination of the employment relationship. In addition, policies should include the penalty an employee can expect if the policy is violated. In some countries, for example, the U.K. and Germany, policies that unambiguously demonstrate the company’s expectations may even form the basis of an enforceable duty under tort law. 
  3. Segregation of Trade Secrets. Many countries value a company that takes internal action to protect its trade secrets. One common method for the internal protection of trade secrets is segregating the trade secrets, either electronically or physically, from all other items and materials. Access to trade secrets should only be given to those who are required to use the protected materials. South Korea, for example, requires that trade secrets be maintained as confidential with “substantial effort” on the part of the company. Similarly, German courts will scrutinize the steps a company takes to ensure that only those who need to know the trade secrets are granted access. 

Companies expanding internationally should consider the appropriate methods to protect their trade secrets and should plan in advance to ensure their materials are secure. By taking some general steps, along with complying with each country’s unique laws, a company will be equipped to protect those things that make it unique in the marketplace.