Introduction Protecting Your Company’s Competitive Edge: Trade Secrets, Confidentiality, and Employment Restrictive Covenants By: Ari Lichterman, Esq. We live in a data-driven, information-based world. It is no surprise, then, that for many companies, their most valuable asset is information—such as customer lists, pricing strategies, internal business processes, and proprietary technology. This information often defines a company and provides its competitive advantage. Employees frequently have access to this information and rely on it to perform their work. However, when an employee leaves for a competitor—or starts a competing business—the risk of that information being taken or misused becomes significant. For employers, well-drafted restrictive covenants that ensure confidentiality and protect trade secrets play a critical role in safeguarding a company’s competitive edge. Understanding how trade secrets are defined, and what steps businesses can take to protect them, is essential. What Is a Trade Secret? All companies have confidential business, financial, or technical information that can be protected through confidentiality or non-disclosure agreements. However, if this information qualifies as a trade secret, it is entitled to heightened statutory protection beyond contractual safeguards. In simple terms, a trade secret is confidential business information that provides a competitive advantage because it is not known by others and cannot be easily discovered. Under Maryland law, the Maryland Uniform Trade Secrets Act (“MUTSA”) defines a trade secret as business information—such as a formula, process, program, method, or compilation of data—that: Md. Code Ann., Com. Law § 11-1201(e). Federal law provides a similar definition under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1839(3), which includes financial, business, scientific, technical, or engineering information that: Although DTSA provides broader examples (e.g., patterns, plans, designs, prototypes, techniques, procedures, or codes), courts generally treat both definitions similarly. Examples of Trade Secrets In practice, trade secrets may include: However, simply labeling information as “confidential” does not make it a trade secret. Employers must demonstrate: Courts will evaluate factors such as industry knowledge, development cost, difficulty of duplication, and the company’s efforts to maintain secrecy. Misappropriation: When Confidential Information Is Taken or Used Importantly, misappropriation can occur even before the information is used, as long as it was acquired improperly. Employers may seek: For example, suspicious data downloads, copying files before resignation, or sharing confidential information with competitors may support a claim. Important Exception DTSA includes an immunity provision allowing disclosure of trade secrets to a government official or attorney solely for reporting or investigating legal violations, or for use in litigation.18 U.S.C. § 1833. If this applies, there is no liability under DTSA or MUTSA. Why Restrictive Covenants Still Matter Even when trade secret laws do not apply, employers can rely on restrictive covenant agreements to protect sensitive information. Well-drafted agreements: These agreements are especially valuable because they: Importantly, they also help demonstrate that the employer took reasonable steps to protect its information—a key requirement for trade secret protection. Protecting Your Business Before Problems Arise The misuse of trade secrets and confidential information can cause significant—and sometimes irreversible—damage to a business. Employers who proactively implement well-crafted restrictive covenants place themselves in the best position to: The attorneys at Luchansky Law are experienced in drafting and enforcing restrictive covenants to protect your business interests while minimizing legal and competitive risk. For more information, contact Luchansky Law at 410.522.1020 or email ari@luchanskylaw.com. How Luchansky Law Can Help Luchansky Law advises employers on compliance, risk mitigation, and litigation strategy. Contact us to protect your business and navigate employment law challenges effectively.