Media Room

dedicated, diverse counsel helping you reach your goals

 

Keep an Eye on Those Vendors: The Soft Underbelly of Trade Secret Protection

 
by John Marsh 24. June 2011 11:00

When protecting their trade secrets, many companies rightly focus on the agreements and safeguards that they have with their employees and business partners. However, an overlooked relationship that they should consider scrutinizing more closely is their relationship with their vendors and prospective vendors. 
 
Take the highly-publicized dispute that Goodyear had with its vendor Wyko Tire Technology. In 2007, two engineers from Wyko visited Goodyear's Topeka, Kansas plant under the auspice of servicing Wyko equipment being used in that plant. According to the indictment in that case, they lied to their Goodyear escorts to get into the plant, they carried a cell phone camera into a restricted area, and one Wyko employee took seven photos of a highly proprietary roll over-ply down device while the other stood at a distance to look for Goodyear employees. The employees then emailed those pictures to others at a Wyko subsidiary, who later used them to design a similar process for Wyko's use. The two Wyko engineers were prosecuted and convicted of 10 felony counts for trade secret theft and wire fraud last year. 
 
Employees may also be tempted to overreach in their relationships with vendors, which are inherently more difficult to monitor than relationships with co-workers or formal business partners. For example, in February, a senior manager of Home Depot plead guilty to stealing its secrets and turning them over to a vendor. According to the U.S. Attorney’s Office, while working as a senior manager in product engineering for the home improvement retailer in 2008, the manager "gave out confidential and proprietary pricing information, including the price that the company was paying the vendor’s competitors for the products that the vendor wanted to sell to the company." He apparently did this in the hope that it would help him get a job with that vendor. (The Trade Secrets Blog has a thorough February 2010 post on this plea).
 
Other situations with vendors may present risks because of the informality that accompany those relationships, particularly in the early stages. As we all know, vendors frequently provide demonstrations highlighting the services that they provide and in many of these situations, employees arrange these meetings without appropriate safeguards, agreements or the involvement of key decision-makers. As a result, a company may find a vendor later claiming misappropriation of trade secrets and ensnared in litigation as a result. See Speed-Trac Technologies v. Estes Express Line, U.S. District Court for W.D. Carolina, Case No. 3:2008cv00101 (vendor sued prospective customer alleging customer misappropriated alleged trade secrets provided during presentation; summary judgment ultimately granted to customer).
 
A recent article by Josh Durham of Poyner Spruill in Charlotte provides some sound advice on how to manage these relationships. A prudent first step is to improve the vendor-invitation process by involving senior management, research and development departments and IT staff in the scheduling of these meetings so they can vet whether the process or technology being offered is a good fit within the organization and in the process, minimize the likelihood of problems. In addition, prior to these demonstrations, vendors may offer one-sided NDAs that are overly broad in their designation of what is confidential; again, involving key decision-makers should ensure that appropriate NDAs that are mutual and identify the appropriate parameters of confidentiality will be executed. Emphasizing that vendor relationships are also subject to company confidentiality policies and agreements. Finally, as the Goodyear and Home Depot incidents illustrate, vendor relationships should be closely monitored, especially situations involving former employees who join vendors or vendor visits that provide access to sensitive technology or permitted in restricted manufacturing areas.
Share on Facebook  Share on Twitter  Share on Linked In

Add comment




  Country flag
biuquote
  • Comment
  • Preview
Loading


About John Marsh

John Marsh Hahn Law AttorneyI’m a Columbus, Ohio-based attorney with a national legal practice in trade secret, non-compete, and emergency litigation. Thanks for visiting my blog. I invite you to join in the conversations here by leaving a comment or sending me an email at jmarsh@hahnlaw.com.

Disclaimer

The information in this blog is designed to make you aware of issues you might not have previously considered, but it should not be construed as legal advice, nor solely relied upon in making legal decisions. Statements made on this blog are solely those of the author and do not necessarily reflect the views of Hahn Loeser & Parks LLP. This blog material may be considered attorney advertising under certain rules of professional attorney conduct. Regardless, the hiring of a lawyer is an important decision that should not be based solely upon advertisements.

BlogRoll

Download OPML file OPML