Protecting Your Business Against Corporate Espionage
It may sound like James Bond, but really, it's just stealingBy Judy Malmon, J.D. | Reviewed by Canaan Suitt, J.D. | Last updated on August 23, 2023 Featuring practical insights from contributing attorney Usama Kahf
Use these links to jump to different sections:
- What Legal Issues Are Included in “Corporate Espionage” Cases?
- Prevention is Better Than Going to Court
- Risks At the Hiring Stage
- Security Measures for When Employees Leave
- It’s Getting More Complicated
Corporate espionage is also regularly referred to as employee defection, unfair competition, industrial espionage, and theft of trade secrets. But Usama Kahf, an employment attorney with Fisher & Phillips in Irvine, California, notes that corporate espionage is the term that makes people think of the movies. “It’s a cool term,” he says.
What Legal Issues Are Included in “Corporate Espionage” Cases?
Kahf represents employers seeking to secure their confidential information. Though employees have access to many kinds of sensitive information, employers need to take steps to protect themselves from industrial spies.
His espionage cases range from disgruntled employees emailing themselves sensitive data—such as a client list before defecting to another job—to representing banks against former contractors.
In one example, a contractor had been hired to develop financial security source code, which he then offered on the internet for sale to the dark web, a form of economic espionage. “In that case, we had to go to the last line of defense and go to court to get a judge to slap him with a restraining order.”
Prevention is Better Than Going to Court
Kahf prefers to take the preventive route, helping clients anticipate what can arise by implementing security policies and procedures to address potential cyber-attacks and corporate spying.
He recommends all employers spend some time thinking about their agreements with employees at all phases of the employment relationship, including in work with contractors.
“I want to make sure that we’re implementing better security measures, better contracts, and better non-disclosure agreements that are reasonably tailored and enforceable.”
Risks At the Hiring Stage
Risks related to hiring can arise when a new employee brings over proprietary information or intellectual property from their former employer—information such as:
- A client list;
- Contract terms;
- Specific details about prior transactions; or
- Special pricing.
If the stolen information is used in a way that benefits the new employer, giving it a competitive advantage, they can potentially be liable, whether the new employer was aware of the practice or not.
“This is one of the areas a lot of people miss,” says Kahf. “Employees will download stuff on their last day.”
Pre-Screening New Hires for Sensitive Information
He works with clients to pre-screen new hires before they start and to establish verbally and in writing that they are not to bring anything with them from their former employer.
Kahf adds, “It’s even worse when you’re hiring someone who’s going to be an officer of the company. If they’re a rank-and-file employee, you can at least have the defense that you had no idea. With an officer, you can’t say you didn’t know—their knowledge is essentially the company’s knowledge.”
Kahf recommends having “robust” confidentiality agreements to ensure company information is protected. “A lot of the ones I see are old or badly written, and opposing counsels have figured out a way to argue around them,” he says.
Security Measures for When Employees Leave
It’s also key to have security practices in place to prevent theft from happening when employees leave.
Modern technology makes it easy for employees to transfer information to themselves without walking out the door with a bulging box of files. But technology also makes it feasible to monitor questionable behavior.
Computer forensics can allow an employer information security to find out if a departing employee has:
- Downloaded data to a USB drive with valuable information;
- Accessed documents that were not related to their final days of work;
- Emailed information to themselves; or
- Exported information to a Google Drive.
It’s Getting More Complicated
As technology evolves, so must employers. It’s no longer a matter of paper documents being stolen.
Many people blur the lines between work and personal technology—like using a personal cell phone to check work email or working from a laptop or tablet at home. Kahf advises his clients that the answer to handling many of these evolving technology issues is contracts. “Put it in contracts and then actually enforce them.”
If you are concerned about protecting your confidential business information, talk to an attorney with experience in employment law and cybersecurity for vulnerability and risk assessment. For more information on this area, see our overview of employment law for employers as well as content related to cybersecurity and data privacy.
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