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Protecting your trade secrets.

How do you cope with the possible loss of vital marketing information when your sales manager or a key salesperson leaves to go work for a competitor?

What about your customer and prospect lists, profitability data, details of your cost system, all the hard-earned information on your customers, proprietary casting process information and the whole wide range of other highly sensitive things he or she knows about your company?

How much is all of this vital information, in the hands of an active competitor, going to cost you? And how can you better protect yourself when marketing people decide to leave?

Covering the basics in an employment agreement affords you some protection. But, most of the standard contracts lawyers pick out of their form books have holes in them you can drive a truck through and are of little value if you should happen to get into court.

So, can former employees take sensitive information with them when they leave? You'll get the best answer from your attorney, but here are some key considerations that will probably determine how safe your valuable information is when a key person moves on.

A primary consideration is what represents your individual foundry's trade secrets and what does not. Generally, trade secrets constitute information about your company and its customers that was communicated to your salespeople while they were in a position of trust and confidence.

Also, you must, through good employment contracts, make it inequitable or unjust for him to disclose this information to a competitor. Mere business policies are usually not considered trade secrets because it is difficult or even impossible to determine if they are unique or if their disclosure would be injurious to your company.

A Trade Secret

Your customer list, on the other hand, is clearly a trade secret because it represents only a very small number of casting buyers and is not an easily identifiable group of companies. Also, it is a valuable asset for which you are entitled to protection. Prime prospect lists, as long as they are reasonably limited, also are probably trade secrets, since they involve a considerable investment in repeated sales calls in an effort to eventually develop casting business.

Information on customers, accumulated by the salesperson, is not so clear cut and you can either win or lose on this one. The compelling argument here is that he or she developed the information while working for you. Thus, it is your property: he has no more right to it then to any other of your customer records.

In essence, when a former marketing person, in combination with his new employer, deliberately uses information acquired while working for you to injure your business, he is guilty of unfair competition. But, of course, you have to either prove it in court or threaten him with a suit to get some measure of protection.

The time to really begin protecting yourself is before your marketing people find the grass greener on the other side of the fence. And one of the best means is with a good employment contract.

There are many legal gray areas when an employee leaves to go with a competitor, but with an effective contract, you will be creating an environment in which you have at least a fighting chance to defend yourself.

Your current marketing staff should understand that it is only good business sense for you to be taking the precaution of insisting on an agreement that protects sensitive information.

Other Precautions

If you are now using an employment agreement, look it over carefully and have it reviewed by your attorney to see if it really does the job. Or, perhaps you should have a separate nondisclosure statement prepared. Here you should specifically identify all documents or information that could give a competitor an unfair economic advantage if they were to be disclosed.

The minimum to be included would be customer and key prospect lists, cost information, pattern numbers, marketing plans and strategies, proprietary processes and techniques, pricing policies and practices, financial data and a wide range of other sensitive information that may be generally classified as trade secrets. It should then be stressed repeatedly to employees that this material is indeed proprietary and entirely confidential information.

If what is secret is carefully spelled out in detail and your marketing people promise in writing not to disclose it or use it to their personal advantage when they leave, you will then be in a much safer position than if you didn't have a good agreement.

This is just one more example of where planning and a little foresight can save you a lot of grief later on--and help make your key marketing data more secure from falling into the hands of your competitors.
COPYRIGHT 1993 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:foundry management
Author:Warden, T. Jerry
Publication:Modern Casting
Date:Aug 1, 1993
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