What are some of the best employer practices for protecting & maintaining the secrecy of trade secrets? Employers are responsible for taking and making reasonable measures and efforts to protect their trade secrets and maintain the secret status of the same. As one would expect, a trade secret becomes a lost asset once it is disclosed and/or used by someone who should not have it.
As a continuation of our discussion, this blog post is an overview of issues related to restrictive covenants that employers within the life sciences industry should understand.
Understanding Restrictive Covenants in the Life Sciences Industry
In order to prohibit the use of proprietary information to the benefit of employees, employers often execute restrictive covenants and, consequently, protect their trade secrets. Through restrictive covenants, employees are prohibited and discouraged from engaging in activities that might harm former employers, such as competing against and/or stealing/soliciting clients.
Ideally, when it is deemed a “restraint on trade,” a restrictive covenant is considered to be invalid. For this reason, while they will at times attempt to strike some terms (the blue pencil rule) or even modify them (equitable information) as a way of limiting their scope, courts have shown reluctance in enforcing broad restrictive covenants.
Nonetheless, a court is likely to enforce a restrictive covenant if such a covenant is (1) not injurious to the public, (2) does not impose an undue hardship on the former employee, and (3) its terms are much less than is needed to protect the legitimate business interest of the employer.
One notable aspect is that restrictive covenants are essentially significant in this highly regulated industry when it comes to corporate transactions, acquisitions, and mergers. Usually, adjustments in the workforce usually move from side to side when larger conglomerates form mergers with, absorb, or purchase other companies within the industry. Employers within the life sciences must, therefore, understand that one thing that is paramount to the protection of assets is to make sure that restrictive covenants remain enforceable against any departing employees and contain the right language for the survival of internal corporate transactions.
In Part XIV of this series and our blog post titled “Pre-employment Screening of Candidates in Life Sciences Industry,” we shall move the discussion forward by hammering on “pre-employment screening,” which is one of the things employers within the life sciences industry should consider during the screening and hiring of potential candidates.
In the meantime, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer & Author.