12 Oct 2017
We frequently work with tech companies who need to protect confidential and proprietary information about their technology. If you’re in the same boat, then it’s critical for you to protect your business interests by implementing meaningful data security policies and infrastructure.
Many businesses put significant resources into securing legal protection for their confidential information and other intellectual property (IP). But of course, to be truly effective, your legal strategy needs to be backed up by other good business practices.
In this post, we’ll review three tools that are commonly used to provide legal protection for confidential information, and then we’ll take a closer look at seven business policies that work hand-in-hand with legal policies to protect your IP.
3 LEGAL STRATEGIES TO PROTECT YOUR IP
Many companies use the following legal tools to protect their confidential information in a cost-effective way.
1. NONDISCLOSURE AGREEMENTS (NDAS)
Broadly speaking, NDAs restrict use and limit disclosure of your company’s protected information. NDAs offer you legally enforceable protection against accidental and intentional confidentiality breaches by third parties.
With that in mind, before you share confidential information with a third party, make sure to have all recipients sign an NDA first — yes, even if you think they are trustworthy!
2. EMPLOYMENT AGREEMENTS
If you’re engaging a new employee who might contribute to the company’s IP, they should sign an employment agreement before they start work. The employment agreement should clearly define what IP is owned by the company, and how the employee is expected to handle confidential information and other IP during and after the course of their employment.
For more details on what the employment agreement should cover, check out our blog post about effective hiring practices.
3. INVENTION DISCLOSURE RECORDS (IDRS)
All tech companies should have an IDR template that employees complete when they develop new, valuable innovations. The completed IDR can then be used as a starting point for obtaining patent or trade secret protection.
7 BUSINESS BEST PRACTICES TO PROTECT YOUR INTELLECTUAL PROPERTY
Legal strategies must be deployed in concert with strong business practices and secure IT infrastructure to ensure that your confidential information won’t be compromised.
1. OFFER EMPLOYEE TRAINING AND INCENTIVES
When confidential information is improperly disclosed, it’s typically through people — namely, your employees. But you can reduce the risk of disclosures resulting from employee negligence by periodically reinforcing your confidentiality policies.
For one, your employment agreement may formally define your company’s IP policy at the outset, but you should use training courses and written materials to continually refresh your employees’ knowledge of company policies and infrastructure over the course of their employment.
For another, while IDRs are effective tools for documenting your company’s IP, they also require a lot of work to fill out. Consider introducing incentives to encourage your employees to submit IDRs.
2. USE DATA ENCRYPTION
If an unauthorized user gains access to a company device or network, and the data hasn’t been encrypted, that user can immediately steal all the information they find. Even worse, if the information becomes publicly available, you might lose trade secret status or other IP rights.
So be sure your data is encrypted, and when you share information with third parties, make sure they do the same. In your NDAs, consider including a requirement that sensitive information must be stored in a secure location and in encrypted format.
There are many affordable software tools that you can use to encrypt your drives, files, and email. If you’re not sure where to begin, start with this list of recommendations.
Where necessary, you also need to enforce strong passwords across all your files and documents.
- Password integrity: Tools like LastPass and 1Password both offer enterprise or “team” access to globally manage passwords and other sensitive information within organizations.
- Multifactor authentication: Even if an unauthorized user discovers your password, they’ll still need to provide additional information before they can access your data.
3. CONTROL WHO CAN ACCESS SENSITIVE INFORMATION
You must maintain full visibility over where critical information is stored, and who is given administrative privileges and access rights to that information.
- Data controls: Use file management systems that allow you to set permissions by user and administrative group.
- Physical controls: Physically secure rooms containing sensitive material, and set restrictions on who can gain access to these rooms.
In your NDAs, consider including requirements for similar data and physical controls over information access.
4. CHOOSE THE APPROPRIATE CLOUD-BASED SOLUTION
Many companies — particularly smaller businesses — are moving their data to cloud-based services. However, even large vendors could be vulnerable to data breaches. As a result, applications that protect information through their infrastructure alone may be less secure.
So when choosing a cloud-based solution, pick one that embeds security measures in the data itself — for example, by encrypting or fragmenting the data.
5. REGULATE USE OF CLOUD-BASED SYSTEMS
As cloud-based systems grow more popular, the boundaries between personal and work devices have also blurred. But if your employees can sync company data to their personal devices, the risk of accidentally compromising confidential information increases.
Consequently, you should set data security policies and procedures that — at the very minimum — include file sharing guidelines.
6. SECURELY BACK UP IMPORTANT FILES
Data loss can happen to any company — so back everything up with multiple redundancies. At the same time, it’s also important to keep those backups secure.
It’s all about balance:
- If you don’t back up at all and lose your data, you’re not only losing the hard work that went into producing it, you’re also losing valuable IP.
- If your backups aren’t stored as securely as your primary data, hackers (and, by extension, competitors) could easily access your IP through your backups.
7. CONDUCT REGULAR TESTS AND AUDITS
Make sure you’re regularly assessing your IT infrastructure — through penetration testing as well as network-security audits — to detect any security vulnerabilities that a hacker could exploit.
PROTECT YOUR IP WITH A COMPREHENSIVE STRATEGY
Combining a solid legal strategy with good business practices can go a long way towards protecting the confidentiality of your IP.
To help you lay a strong foundation for your legal strategy, we’ve put together a FREE IDR template that streamlines the process of documenting your company’s inventions. Download it now!
PROTECT YOUR INTELLECTUAL PROPERTY
Tracking the intellectual property that your employees create is not only a good business practice — it also helps to streamline the patent process itself.
Our FREE invention disclosure template is a simple document that helps you:
- Record essential details about your invention
- Provide evidence of important dates
- Speed up the process of conceiving an invention and filing a patent application
- Craft stronger patent claims
Fill out the short form on this page to get the template now.
GET THE TEMPLATE
Michael K. Henry, Ph.D.
Michael K. Henry, Ph.D., is a principal and the firm’s founding member. He specializes in creating comprehensive, growth-oriented IP strategies for early-stage tech companies.