Twitter Threatens Threads with Trade Secret Litigation

Trade Secrets

The Risk in Hiring a Competitor’s Employees

On July 5, Elon Musk’s Twitter (now known as “X”) sent a Cease and Desist Letter to Mark Zuckerberg’s Meta Platforms demanding that Threads stop using Twitter’s trade secrets and other highly confidential information. (First reported by Semafor on July 6, 2023.)

Twitter’s stated concern results from Thread’s hiring dozens of Twitter employees over the past year. Twitter said that these employees had access to the information, improperly retained documents and electronic devices, and were assigned to develop Threads in a matter of months. Twitter also said that these employees had ongoing obligations to Twitter. But, a Meta spokesperson, Andy Stone, posted on Threads that, “No one on the Threads engineering team is a former Twitter employee — that’s just not a thing.”

What are Trade Secrets?

Trade SecretsEvery business has trade secrets – confidential information that may be sold or licensed, such as a device, formula, program or technique. To qualify as a trade secret, information must be commercially valuable, known only to a limited group of people and be subject to reasonable steps to keep it secret. For example, Google’s search algorithm, KFC’s secret blend of herbs and spices, and a company’s business plans all qualify as trade secrets.

Trade secrets are not registered with a government agency, but they’re protected. The Uniform Trade Secrets Act (UTSA) is legislation published in 1979 and enacted by most states. One of the UTSA’s goals is to make the state laws governing trade secrets uniform. In states where the USTA is not enacted, infringement remains a common law tort. Trade secrets are also protected federally under the Defend Trade Secrets Act (DTSA), which allows the owner of a trade secret to sue in federal court when their trade secrets have been infringed. To make a trade secret infringement claim, you need to prove that, 1) the subject matter at issue is in fact a trade secret, 2) you made reasonable efforts to keep it protected, and 3) somebody wrongfully took the information.

Protecting Trade Secrets with Employment Agreements

Trade secrets are most often put at risk when an employee leaves. The employee may have had access to sensitive and valuable information. If the employee leaves to work for a competitor, there’s the potential for loss of trade secrets.

You should have written agreements in place with employees, particularly key employees, regarding trade secrets and the need for confidentiality. These agreements are extremely helpful if trade secrets are misappropriated. Many times, providing the new employer and the former employee with a copy of the agreement can lead to an amicable resolution. If litigation is required, agreements can be helpful in establishing the existence of trade secrets, the employee’s knowledge of them, and your reasonable steps to protect them.

How to Avoid Trade Secret Litigation when Hiring Employees

You must be careful when hiring, especially from competitors. The new employee may bring litigation to your doorstep. To prevent this from happening, consider these steps.

  1. Don’t assign the new employee to projects that they worked on at their last employer. This is what Twitter alleges Threads did. If the new employee is not using proprietary information in her new role, there is no theft.
  2. Develop a written policy prohibiting the use of trade secrets or confidential information in your business and provide the written policy to new employees. Advise the new employee in writing that you respect Intellectual Property rights and have no interest in any trade secrets and confidential information from former employers. This supports your defense that such information is not used.
  3. Have the new employee sign an agreement confirming that they are not in violation of any restrictive agreements with their prior employer and will not use any confidential information or trade secrets in their new role.
  4. Prohibit the use of electronic devices used at the former employer. A company was accused of using confidential information that was on a new employee’s computer that he used at his former employer. The company had to terminate his employment to resolve the dispute.
  5. White room developments that could create issues. Limit access to projects to only employees that have no connection to a competitor or use a third party for development.
  6. Create a Chinese Wall between the new employee and any developments related to a former employer’s business.

It’s important to remember that employees can use general knowledge and skills they acquired on the job. These can’t be protected as trade secrets. But problems arise when the employee has access to proprietary information, the lines become blurred.

The Takeaway

Be careful when hiring employees. Have procedures in place to protect your business from litigation. You don’t want to be distracted by avoidable litigation.

 

Bill Honaker, The IP Guy

About the Author:

Bill Honaker, “The IP Guy” is a former USPTO Examiner, a partner with Dickinson-Wright, and author of the forthcoming book, Invisible Assets – How to Maximize the Hidden Value in Your Business. To download a sample chapter, click here.

To get answers to your questions click here. To schedule a time to talk, you can access my calendar by clicking here, email Bill @IPGuy.com or call me at 248-433-7381.

 

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