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Sacramento Businesses Protect Their Confidential Electronic Data From Theft By Former Employees

Often Sacramento employees who are on their way out the door take with them information for use in their new jobs. For instance, the departing employee may download their Outlook Contacts, save documents they created, take a client list, or even more insidious, take technology created specifically for the former employers’ business. Taking the information could be a theft of a company’s trade secret information. A recent federal court of appeals ruling here in California enforces the importance of Sacramento businesses having appropriate safeguards in place to protect their business in the event that trade secrets and other confidential data are pilfered by a departing employee. The Ninth Circuit Court of Appeals held that, so long as the employer placed restrictions on an employee’s use of electronic information, the employer can take action against a departing employee under the Computer Fraud and Abuse Act (CFAA) for misappropriating company data for the benefit of a competitor. U.S. v. Nosal, No. 10-10038, 2011 WL 1585600 (9th Cir. April 28, 2011).

In Nosal, the Ninth Circuit determined that an employee exceeds authorized access to an employer’s electronic information when he or she violates the employer’s computer access restrictions — including use restrictions. The Court found that if the employer has no restrictions in place that limits an employee’s access and use of electronic information, then the employer has no claim for misappropriation of trade secrets under the CFAA.

harddisc.jpgViolations of the CFAA can result in recovery of damages, injunctive relief and even criminal penalties, making it a valuable tool for combating misappropriation of competitively sensitive electronic data. The California Uniform Trade Secret Act (“UTSA”) contains similar damages provisions, also making the UTSA an effective tool for protecting confidential information in the event of a misappropriation by a former employee (or any third party). Each of these statutes – the CFAA, and the UTSA – require that certain steps be taken to protect confidential information.

Businesses should have an attorney audit their policies, practices and agreements with their employees to identify ways in which the safeguards designed to protect valuable trade secrets and other confidential information can be improved. Getting the right legal advice before and after misappropriation of confidential assets is key to taking full advantage of available laws and remedies.