Protecting Agency Trade Secrets in the Modern Workplace

By Jeffrey Farrow, Esq., partner at Michelman & Robinson, LLP

Today's workplace bears little resemblance to that of 20 years ago. On average, today's college graduate will change employers six times over the course of his or her career, a threefold increase from only 20 years ago. With increased employee mobility comes a need for employers to protect their company's assets from being raided by a departing employee and used by the new em­ployer. 

The lifeblood of insurance agencies and brokerages is the competitive edge they achieve by doing things better, smarter, faster and more efficient than the competi­tion. That edge is often the product of a company's “trade secrets.” 

Trade secret information is information that is not generally known to the public, and is the subject of efforts that are reasonable under the circumstances to maintain its se­crecy. In the case of insurance agencies and brokerages, trade secrets consist of their clients' names, insurance needs and preferences, policy expiration dates, and premium paid. 

Both employers and employees recognize the value of trade secrets. To the employer, trade secrets reflect the ability of the company to develop, market and sell its products and/or tailor services and products to its customers.  To an employee, trade secrets represent the opportunity and ability to market themselves by offering to provide the “edge” that the competition is lacking. 

Given today's highly mobile work force, coupled with the speed and ease by which trade secrets can be electronically sent around the world, trade secret owners must impose safeguards on what trade secrets can be accessed and by whom, where the trade secrets can be accessed, when the trade secrets can be accessed, and why the secrets are accessed. If those precautions are not taken, the essence and value of the company can be lost with the click of a mouse. 

To qualify for trade secret protection, trade secret owners must use “reasonable measures” to safeguard their secrecy. At a minimum, they must inform others that it considers the information to be protected by taking certain steps, such as restricting access to the sensitive information, permitting access or use of the trade secrets only while working on site, requiring company visitors to sign non-disclosure agreements, and requiring employees having access to the information to sign non-disclosure or other confidentiality agreements regarding the use and/or dissemination of the information.  

To minimize the risk of a departing employee stealing trade secrets, the owner should provide all employees with written guidelines governing their access, use and dissemination of the com­pany's trade secrets. These guidelines should specify what type of information the company considers confidential and how the information should be treated. 

Although the remedies available to an owner for the wrongful taking, use and dissemination of its trade secrets are vast–and the civil and criminal penalties substantial–the damage done to a company often cannot be re­paired where the trade secrets are quickly and quietly dissemi­nated across the world over­night. Although it's nearly impossi­ble to put the genie back in the trade secret bottle, it can be almost as difficult to recover economic losses caused by the misappropriated trade secrets from a former employee who may be judgment proof.  

While civil litigation is often successful in convincing the “new employer” to cease using the coveted trade secrets, that remedial practice comes at a high cost to the trade secret owner, both financially and competitively. 

By implementing a few safe­guards now, the trade secret owner can significantly minimize the risk of a departing employee stealing the company's trade se­crets, and at the same time, en­sure that by conspicuously identi­fying the information and docu­ments as trade secret materials any competitor who improperly comes into possession of them will immediately know that the trade secret owner will aggres­sively protect its economic inter­ests in that material. 

As such, the saying that “an ounce of prevention is worth a pound of cure” is just as appropri­ate to trade secret owners as it is to patients who wish to avoid a debilitating condition that will take months if not years to heal.