When you start a new technology company while employed by another, you put your startup’s intellectual property (“IP”) at risk.
One of the biggest threats to your new startup is a claim of trade secret misappropriation by your former employer. It may allege that you used or disclosed its trade secrets in the creation of your startup’s IP and therefore it owns the resulting work.
One of the best ways to minimize this risk is to quit your old job like a newborn baby—leave naked like the way you entered the world.
You want to strip yourself of anything belonging to your former employer.
Do not take any documents, computers, paper or electronic files, electronic storage devices, prototypes or work that belongs to your former employer, regardless of whether you think it actually qualifies as a trade secret.
Do not take source code or software tools, even if you wrote them.
To stay safe, do not take your phone or your business contacts list. Customer lists can qualify as a trade secret and companies frequently sue over their use and disclosure.
Keep NOTHING in your possession that refers to your former employer except a copy of any contracts you signed and minimal documents related to any pension, profit sharing or insurance documents.
If you need to take something else, get permission from the company in writing.
And even if they offer to let you take your company computer — don’t.
Remember that in the event of litigation, a trade secret plaintiff will typically seek all documents that mention its name. You will have to turn over everything in your possession, custody or control. That includes documents in your house and garage or on remote servers. Many entrepreneurs are stunned to learn this after litigation has commenced.
Once a lawsuit is imminent or filed, it is too late to clean house. Destruction of documents can lead to a claim of spoliation of evidence and the plaintiff may win on a technicality.
You may be characterized as a trade secret thief regardless of whether your possession of your former company files was inadvertent.
Further, when you quit, it is a good idea to write a letter to your former employer stating that you understand your legal obligation not to use or disclose company trade secrets.
Think of the letter as the first exhibit in your litigation defense.
Make a show of returning all company property. State in your letter that you returned all company documents and files in your possession with the exception of your employment contract and 401 K documents. State the name of the person who took the documents and the date of their return.
By leaving your old job like a newborn baby, you can decrease the risk of trade secret litigation by your former employer.
This is the final post in the Startup Launch Series. Click on the category to see other related posts.
The information provided in this legal blog is not intended as legal advice and does not create an attorney-client relationship. Please do not submit questions or comments seeking legal advice or submit confidential information through this blog. By communicating through this blog, you understand and agree that the information will not be treated as confidential and the publisher has no duty to keep it confidential.
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Jill, Thank you for the series! Love the tone of your posts. One question that arises from this post is about “having an idea on company time.” If your job inspired your idea – it was a problem you noticed that wasn’t being solved for customers, it was a gap in your company’s offerings, it was a piece of technology made possible by tools you worked with at the company, etc – is it the property of your company? I worked for an IP company that basically claimed it owned all my intellectual efforts conceived while an employee of the company in my employment contract – whether they were worked on during work hours or not. You can’t leave all your ideas behind. Thoughts?
The legislatures in California and Washington have tried to stop employers from claiming the inventions of their employees to some extent. But even California recognizes contracts that own employees’ “ideas”, especially ideas that were thought up on company time with company tools in response to company problems. Because employees take their brains with them when they leave, some jurisdictions recognize an “inevitable disclosure” doctrine claiming that it will be inevitable that an employee will use trade secrets that are in his brain in his new job. Consequently, courts may limit the employees future employment. California has refused to endorse this doctrine. At least one economist has argued that such idea/trade secret leakage is a good thing that helps the economy and makes Silicon Valley a vibrant place.
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