What is a Trade Secret? What To Do When You Learn that a Former Employee has Taken Trade Secrets to a New Employer


Trade secrets are valuable pieces of confidential information that give a business a competitive advantage in the marketplace. These secrets can encompass a wide range of proprietary information, such as manufacturing processes, customer lists, marketing strategies, formulas, or technical know-how. Essentially, a trade secret is any information that is not generally known to the public, provides a business with a competitive edge, and is subject to reasonable efforts to maintain its secrecy. Engaging an attorney that is familiar with the Colorado Uniform Trade Secrets Act (C.R.S. §§ 7-74-101 – 110) is important when dealing with trade secrets issues in Colorado.

What to Do When You Discover Potential Trade Secret Theft

When a former employee takes trade secrets to a new employer or business, it raises serious legal and ethical concerns. While theft of trade secrets is a criminal offense in Colorado (C.R.S. § 18-4-408), it also raises a host of civil legal issues. Here’s what you should do in such a situation:

  1. Gather Evidence: Before taking any action, gather as much evidence as possible to confirm that trade secrets have been taken. This might include reviewing emails, documents, or other digital records, and interviewing employees who may have witnessed the actions in question. It’s essential to have a clear understanding of what information has been taken and by whom.
  2. Consult Legal Counsel: Contact an attorney experienced in trade secret law to guide you through the process. They can provide valuable insights into your specific situation and advise you on the best course of action. Trade secret laws can vary by jurisdiction, so it’s crucial to have legal expertise tailored to your region.
  3. Evaluate any Non-Disclosure Agreements (NDA): Review any non-disclosure agreements (NDAs) and contracts with confidentiality clauses that the former employee signed during their tenure with your company. These documents outline the contractual obligations of employees regarding the protection of sensitive information and can serve as a legal basis for your case.
  4. Cease-and-Desist Letter: Your attorney may recommend sending a cease-and-desist letter to the new business and the former employee. This letter puts the other side on notice of your claims, can demand the return of the trade secrets, and threatens legal action if necessary. Sometimes, the mere threat of legal action can lead to a resolution.
  5. File a Lawsuit: If negotiations and the cease-and-desist letter do not lead to a satisfactory resolution, you may need to file a lawsuit against both the former employee and their new business.
  6. Seek Injunctions: As part of your legal action, you can seek preliminary and permanent injunctions to prevent further use or disclosure of the trade secrets. These injunctions can be critical in protecting your confidential information during the legal proceedings.
  7. Mitigate Damages: While pursuing legal action, take steps to mitigate the damage caused by the loss of trade secrets. This may involve corresponding with relevant vendors or customers and reevaluating existing efforts and relationships.
  8. Negotiate a Settlement: In some cases, it may be in your best interest to negotiate a settlement with the former employee and their new business. Settlements can often save time, money, and resources compared to lengthy legal battles, but they should be carefully crafted with the guidance of your legal counsel.
  9. Educate Employees: After resolving the situation, or as a proactive measure, provide education and training to your employees regarding the importance of trade secret protection and the consequences of unauthorized disclosure or use.
  10. Review and Improve Security Measures: Use the incident as an opportunity to reassess and improve your company’s security measures for safeguarding trade secrets. This may include implementing stricter access controls, encryption, and data loss prevention strategies.

In conclusion, trade secrets are valuable assets for a business, and protecting them is crucial to maintaining a competitive edge. When a former employee takes trade secrets to a new business, a well-planned and legally informed response is essential to protect your interests and uphold the principles of intellectual property law. Consulting with legal experts and following the appropriate legal processes is key to resolving such situations effectively.