The Ever-increasing Need for Sound Proprietary Information Agreements

And Related Policies, In This Rapidly Changing Business World

By Lonnie Giamela Partner, Fisher & Phillips, LLP | June 23, 2013

It is an understatement to say the realm of communication has changed with social media. It seems like overnight social media has revolutionized not only the way we communicate with each other, but also the way we transport information. While many companies have utilized social media to generate business by employing new marketing schemes, companies must also be wary of the negative effects social media could have on its business. Without a doubt, social media has become the latest avenue by which a company's proprietary information can be compromised.

One of the greatest risks facing companies today is the ability of its own employees and third parties to access and obtain confidentiality information. As with any company, the protection of proprietary information, including trade secrets, can make the difference between a profit and loss and overall success or failure of the business. Annually companies across this nation spend millions of dollars and devote countless hours to develop and nurture its proprietary information that has not only distinguished its product from its competitors, but has also been a key component in the company's potential success. Unfortunately, the click of a button from an employee's handheld device could not only send such information to his personal email account but also publish it on the worldwide web through endless avenues, including facebook and/or twitter. Imagine a situation where a disgruntled staff member in a sales or catering department publishes internal figures for banquet related costs or profits or, additionally, pricing strategies designed to better position your hotel against those right down the street. As such, companies must implement sound confidentiality agreements and related policies to ensure its proprietary information remains confidential.

A. Identification of Trade Secrets

First and foremost, a company should clearly identify its proprietary information in order to clearly understand the parameters it must take to protect such information. Generally speaking, proprietary information (trade secrets) consists of valuable commercial information, not known to the general public, that provides a business with an advantage over competitors who do not have that information. By way of example, trade secrets include ideas, compilations of data, such as customer lists, and inventions.

The first step of identifying a company's trade secrets is extremely important. However, often times companies do not spend the time to indentify such information. To the contrary, companies develop an over inclusive list of information it believes is proprietary. However, simply characterizing company information as proprietary information does not make every public disclosure of it a theft of a trade secret. Hotels should focus on information that would be identified in response to questions such as "what private information do you have that is unique and private to your company and would be detrimental to your operations if it is known to the general public" and/or "what information of your has extra value because you created it and it is not known by your competitors." This could include sales and marketing information, customer lists, research and development, product development on new linens, shower equipment or guest accommodation tool. Additional confidential information could relate to pricing, profit and loss, guest stay history, or data on programs provided to guests who frequently stay at your hotel. This identification is important to ensure that an agreement is not challenged or diluted for being too overbroad.

Most importantly, the company must be very clear on the parameters of its proprietary information. This will enable it to focus its preventative measures in ensuring proprietary information does not end up with a third party, including a competitor.

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