Myth vs. Fact: What Business Owners in Ohio Need to Know About Trade Secret Protection and Employee Departures

Trade secrets can be among businesses’ most valuable assets. When an employee who is knowledgeable about a business’s trade secrets leaves, whether—and to what extent—the business can prevent unauthorized use depends largely on what the business has (or hasn’t) done already. Learn more from the Ohio trade secret lawyers at Rendigs.

When an employee who has information about a business’s trade secrets leaves to join a competitor or launch a competing venture, protecting the business’s trade secrets is critical. If the business has taken the necessary steps to secure the protections that are available under Ohio law, the business will be able to pursue enforcement as necessary. However, if the business has not taken the necessary steps to secure the protections that are available, there may be little that the business can do to prevent the former employee from using its confidential information for competitive purposes.

This highlights a key consideration for businesses that rely on confidentiality to maintain a competitive advantage: Protecting this confidentiality is paramount. While trade secret protections are available in appropriate cases, it is up to businesses to secure these protections and maintain them on an ongoing basis.

When Can Businesses Claim Trade Secret Protection Under Ohio Law?

While the term “trade secret” is commonly used to describe confidential or proprietary business information, it has a precise definition under Ohio law. To qualify as a trade secret, confidential information must satisfy two key requirements:

• The information must “derive[] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use;” and,
• The information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

This has two important implications for business in Ohio. First, not all confidential information is capable of qualifying as a trade secret. Even if information is confidential—and maintaining its confidentiality is important for legitimate business purposes—the information will not qualify as a trade secret if it does not “derive[] independent economic value” from being kept out of the public eye.

Second, confidential information does not qualify for trade secret protection in Ohio unless the business claiming protection undertakes reasonable efforts to maintain its secrecy. What is “reasonable” varies from case to case, with reasonableness being assessed based on the business’s financial resources, the nature and value of the information, and other pertinent factors. With this in mind, some examples of efforts that may be necessary to secure trade secret protection in Ohio include:

• Requiring employees to sign nondisclosure agreements (NDAs)
• Labeling files as “Confidential” or “Proprietary”
• Establishing policies that restrict access to information on a need-to-know basis
• Providing training regarding the protection of confidential information to relevant personnel
• Implementing physical and logical access restrictions

There is no single “right” amount of effort to secure trade secret status under Ohio law—and this is critical for business owners and executives to keep in mind. Ultimately, business leaders need to make informed decisions based on the specific circumstances at hand, and this generally involves relying on the advice of counsel who can assist with implementing a reasonable set of safeguards under Ohio law.

How Can (and Should) Businesses Protect Confidential Information that Doesn’t Qualify as a Trade Secret Under Ohio Law?

Importantly, even if information does not qualify as a trade secret under Ohio law, the information can still be protected through other means. The most common means of preventing employees (and former employees) from using a company’s confidential information for competitive purposes is by requiring employees to sign an NDA.

Employee NDAs are generally enforceable in Ohio, provided that they are reasonable in scope and serve a legitimate business interest. If an employee (or former employee) is subject to a legally enforceable NDA, any attempts to use information covered under the NDA for unauthorized purposes can warrant enforcement action—including formal enforcement action in court if necessary.

FAQs: Protecting Companies’ Trade Secrets and Confidential Information in Ohio

What should I do if a former employee is using our company’s trade secrets?

If a former employee is using your company’s trade secrets (or if you have reason to believe that a former employee may be using your company’s trade secrets), you should consult with your company’s legal counsel promptly. While trade secret protections are available under Ohio law, companies can lose the ability to rely on these protections if they do not take appropriate legal action in time. Additionally, even setting any pertinent legal challenges aside, the further a company’s trade secrets spread, the more difficult it can become to prevent their unauthorized use and reproduction.

What if a former employee signed an NDA but the information at issue doesn’t qualify as a trade secret under Ohio law?

While having employees sign an NDA is a common means of protecting trade secrets, companies can use NDAs to protect other confidential information as well. As a result, if a former employee is using any confidential information in violation of an NDA, this could warrant prompt remedial action.

What are the remedies for trade secret infringement in Ohio?

In Ohio, potential remedies for trade secret infringement include injunctive relief and damages. Companies that are facing misuse of their trade secrets can seek a preliminary injunction on an emergency basis when necessary. This is often the first step in the process when a former employee refuses to comply with a company’s informal request to cease and desist any unauthorized use.  

Contact Us for a Confidential Initial Consultation

If your company is dealing with a former employee’s unauthorized use of trade secrets or other confidential information, we encourage you to contact us promptly so that we can help. To arrange a confidential initial consultation with an Ohio trade secret lawyer at Rendigs, please call 513-381-9200 or tell us how we can get in touch online today.