Can Your Competitors Steal the Keys to Your Kingdom - and Get Away With It?
Can Your Competitors Steal the Keys to Your Kingdom - and Get Away With It?
ABC Company and XYZ Company are competitors. ABC's revenue and profits are way off, but XYZ is prospering, and ABC can't quite figure out why. ABC's president considers his options, and consults with the company's counsel. "I want to steal their sales and production managers," he confides. "Even if I have to double their salaries and provide a profit share, we come out way ahead - they can bring us XYZ's customer list, pricing and margin data, supplier information and marketing strategies. Can we do that?"
Depending on the facts, ABC's counsel may well give his client the go ahead. Good news for ABC. A potential death knell for XYZ.
In these difficult times, struggling companies are attacking successful companies with increasing regularity and success. The message for successful companies is plain: the recession has heightened the need to protect key people, proprietary information, business methods and business resources from competitive raids.
We've expended substantial efforts over the last couple of years assisting clients in this struggle, and here's what we know: the nature of the free enterprise system makes it difficult to provide complete protection, but the law has evolved some effective and sophisticated tools and strategies that successful companies can no longer afford to ignore. For instance:
- Trade secrets protection. The Uniform Trade Secrets Act can protect "trade secrets" - basically, the confidential techniques, information and work product you use to conduct business and create value. In order to utilize the benefits the Act can provide, however, you'll need to develop, implement and enforce certain internal protocols.
- Confidentiality and Nondisclosure Agreements. They're a must in your dealings with employees, vendors, consultants, partners, potential buyers, and so on.
- Covenants not to compete. They come in a variety of flavors. They can keep your key people from working for the competition. Or, for instance, they can be limited to post-termination restrictions on their right to contact your customers and prospects.
- Work for hire agreements. You hire a consultant to develop a software program or production protocol. Unless you protect yourself, when all is said and done you'll have the right to use the program or protocol, but the consultant will own it and will have the right to market it to your competitors, even though you paid for it. A work for hire agreement can fix that.
- Intellectual property protection. Sometimes, copyright law can provide certain crucial protections. Sometimes, trademark law is what's needed. Sometimes, a business process or method can be patented.
These are not cookbook solutions. They need to be custom-fitted, and they work better in some contexts than others. But, often, they are the difference between success and failure. We'll expand on these and other ways to keep others from reaping what you've sown in future issues and on our website.
In the meantime, watch your back, and let us know if we can help.
