Protecting Trade Secrets During (and After) a Global Pandemic: Practical Tips for Employers

by Russell Beck and Hannah Joseph

Practice Tips

 

The evolution toward a cloud economy has made it easy and often profitable for employees to misappropriate valuable data from their employers. Indeed, pre-pandemic estimates suggested that over 50 percent of employees take – and most of them are willing to use – their employer’s information when leaving a company.[1]

Against this backdrop, COVID-19 unexpectedly caused the world to shut down in early 2020, resulting in mass layoffs, the highest unemployment rates since the Great Depression, and a fundamental and perhaps permanent shift toward a predominately remote workforce.

Together, these factors have created a precarious environment for trade secrets, as well as customer relationships and other legitimate business interests. Employees working from home have more opportunity to convert company information and customers, and some, particularly those facing involuntary unemployment, may feel driven to do so. Moreover, the ongoing crisis has made preliminary injunctive relief (the judicial remedy most often used to protect trade secrets and other legitimate business interests) more elusive, as courts are typically less willing to restrain employees from competitive employment during economic downturns. See, e.g., All Stainless, Inc. v. Colby, 364 Mass. 773, 781 n.2 (1974).

Whether during or after the pandemic, it is vital for companies to have strong measures in place for protecting their trade secrets and other legitimate business interests, rather than to solely rely on after-the-fact litigation. Below are some practical tips for how to do so.

Tips for protecting trade secrets and other legitimate business interests during and after a global pandemic

Know your trade secrets. A remote workforce means that employees are developing, accessing, and using their employer’s trade secrets from home (and elsewhere). Accordingly, understanding the categories, sources, and life cycles of the company’s trade secrets, and the risks of exposure to which such information is most susceptible, is necessary for establishing and implementing policies and practices that are best suited to protect that information during and after the pandemic. Depending on the organization, the analysis will likely need to involve management, human resources, legal, corporate governance, sales, information technology, information management, research and development, manufacturing, and other relevant stakeholders.

Firm up policies and procedures. Once a company has categorized its trade secrets, both existing and under development, it must ensure that its policies and procedures are appropriately designed to protect the information against likely sources of risk. Such policies and procedures, which should be reviewed on a regular basis, are also critical to protecting other legitimate business interests, such as customer goodwill.

Among other things, employers should have policies that establish clear criteria, protocols, and expectations for the access, use, and disclosure of confidential information, including third-party information; working from home; the use of the employer’s devices, systems, and accounts (and, if applicable, the employer’s policies concerning monitoring such devices, systems, and accounts); the use of personal devices; the use of social media accounts, including as they relate to client communications; the use and protection of passwords; and the post-employment return of information and property. In addition, employers should have a policy that instructs employees to report incidents of unauthorized access, use, or disclosure of confidential information, and provides clear instructions for how to make such a report. This list is not comprehensive, and policies are not one-size-fits-all; they must be tailored to meet the unique needs of the employer and be reasonable in the context of the company’s needs, capabilities, and culture.[2]

Employers should also work closely with their remote employees to ensure that the employees’ at-home work environments are secured against both external threats and inadvertent disclosure. For example: home Wi-Fi routers should be secured with strong passwords; passwords, non-guessable meeting IDs, and other security settings should be used for video conference solutions like Zoom; confidential information should not be reviewed where others in the household may see or overhear it; and confidential information should not be left out in the open when the workspace is unattended. Employers should be prepared to run through a comprehensive checklist with their employees to make sure that employees are taking necessary precautions to protect their workspaces.

Finally, the unfortunate reality of increased furloughs and layoffs during the pandemic dictates that employers have a system in place for off-boarding employees remotely. The system should include, at the least, a mechanism for terminating exiting employees’ access to the employer’s information and information systems (including the remote wiping of company data from devices in the employee’s possession), for securing the full return of all equipment and confidential information, and for the employee to acknowledge their obligation to return (and not retain, use, or disclose) the employer’s confidential information (as well as to comply with their other post-employment contractual obligations).

Educate your employees. Policies and procedures are worthless, and can hurt more than help, if they are not disseminated, understood, and followed. This means that employers must, on an ongoing basis, educate their employees about company policies and practices. While in-person trainings are ill-advised in the era of social distancing, they may be easily replaced by online trainings, whether live or pre-recorded. Processes should be in place that require employees to not only read the policies and procedures, but also to acknowledge that they understand and agree to abide by them. Policies and procedures should provide an avenue for employees to ask questions and obtain answers that will be consistent throughout the company, either through legal or other channels. Employers are well-served by maintaining accurate records of policies and procedures and any amendments thereto, training dates, and employee acknowledgments. While training and acknowledgments will not necessarily prevent all willful misconduct, they may serve as a deterrent, help to limit incidents of inadvertent disclosure (or unauthorized solicitation) and, if litigation becomes necessary, help to establish the company’s reasonable efforts to protect its trade secrets and other legitimate business interests.

Monitor your workforce. Trade secret misappropriation and other forms of employee misconduct do not usually happen in a vacuum. Oftentimes, there will be warning signs that an employee is unhappy (e.g., a lack of engagement, an attitude shift or sudden change in behavior, increased activity on LinkedIn[3]). Moreover, employees who take their employer’s information with the intention of using it at their next place of employment frequently commit multiple acts of taking in the days and weeks leading up to their termination. Similarly, employees who plan to solicit customers may begin well before termination. For those reasons, employers should consider monitoring their employees’ email activity as well as their activity on other information systems to determine whether the employees are accessing information that they do not have a business need to know or are accessing appropriate information, but with unusual frequency. Periodic monitoring may enable an employer to detect and address internal threats earlier, thereby obviating the need for judicial intervention. Before engaging in any kind of monitoring, employers should disseminate policies that put employees on notice that the employers’ devices, systems, and accounts belong solely to the employer and may be monitored on a periodic or ongoing basis.

Conclusion

While these steps are intended to help employers protect their legitimate business interests, they are not comprehensive and are not guaranteed to protect against every threat of disclosure and other forms of misconduct. When implemented correctly, however, they should substantially reduce overall risk. In addition, where litigation is necessary, an employer that has implemented the above steps will have ample evidence to show that it both identified its legitimate business interests to its employees and notified them of their legal obligations to protect such interests. This can dramatically improve an employer’s chances of prevailing in court.

[1] SeeWhat’s Yours is Mine: How Employees are Putting Your Intellectual Property at Risk,” White Paper by the Ponemon Institute and Symantec Corporation (2013), available at https://www.ciosummits.com/media/solution_spotlight/OnlineAssett_Symantec_WhatsYoursIsMine.pdf.

[2] For a comprehensive checklist of steps employers can take, see “A primer and checklist for protecting trade secrets and other legitimate business interests before, during, and after lockdown and stay-at-home orders,” available at https://www.faircompetitionlaw.com/2020/05/17/a-primer-and-checklist-for-protecting-trade-secrets-and-other-legitimate-business-interests-before-during-and-after-lockdown-and-stay-at-home-orders/.

[3] See, e.g., “13 Signs That Someone Is About to Quit, According to Research,” by Timothy M. Gardner and Peter W. Hom, Harvard Business Review (Oct. 20, 2016), available at https://hbr.org/2016/10/13-signs-that-someone-is-about-to-quit-according-to-research.

 

Russell Beck is a founding partner of Beck Reed Riden LLP. He has authored books on trade secrets and restrictive covenants, assisted the Obama Administration on a Call to Action on noncompetes and trade secrets, drafted much of the Massachusetts Noncompetition Agreement Act, and revised the Massachusetts Uniform Trade Secrets Act. Russell teaches Trade Secrets and Restrictive Covenants at the Boston University School of Law and is President Elect of the Boston Bar Foundation.

Hannah Joseph is senior counsel at Beck Reed Riden LLP and focuses her practice on trade secrets and restrictive covenants law. Hannah regularly publishes and speaks on the topics of intellectual property law and restrictive covenants, including at the American Intellectual Property Law Association, Boston Bar Association, and Practising Law Institute. In addition, Hannah co-teaches the course Trade Secrets and Restrictive Covenants at Boston University School of Law.


BBA Volunteers Support Our Mission in Challenging Times

by Christine M. Netski

President’s Page

As new and unprecedented personal and professional challenges continue to unfold amid the COVID-19 pandemic, I continue to be inspired by the way our legal community has come together to respond quickly, effectively and compassionately to so many impacts the crisis is having on access to justice and our profession. I have also been humbled by our members’ unwavering support and deep engagement during such difficult and uncertain times. Your dedication has allowed the BBA to continue to fulfill its mission to advance the highest standards of excellence for the legal profession, facilitate access to justice, foster a diverse and inclusive professional community, and serve the community at large in a virtual environment.

As we look ahead, although we don’t know when we’ll be able to gather again at 16 Beacon Street, we do know that we’ll continue to serve our members’ needs and support our profession as we move through new phases of this crisis. I want to share some of our efforts that are currently underway.

Expansion of Virtual Education Resources

Educational programs are our most significant member benefit. Our members rely on our programs to help them adjust to changes in our profession, learn new skills, and enhance their practices.

We launched our first webinar on March 25 and, since then, we have hosted 50 webinars viewed live by over 2,000 attendees.

Soon after the crisis began to escalate in the Commonwealth and rapid changes in the law began to accumulate, a number of Sections, including Labor and Employment, Criminal Law, and Trust and Estates, sprang into action to host programs addressing the latest legal developments in their practice areas. Others, including the Life Sciences Industry Group and the Privacy, Cybersecurity, and Digital Law Section, convened roundtable discussions where experts shared insights into the current and anticipated impacts of the crisis.

In addition to covering the rapidly-developing changes in the law, our webinars have also provided members with critical information and advice about how best to practice remotely. These programs have offered guidance on topics like handling remote proceedings, conducting virtual depositions, and practicing ethically under these unusual circumstances. Some have offered our members the chance to hear directly from our courts, including through a virtual version of the annual Bankruptcy Bench Meets Bar program and a webinar on the current state of civil litigation in Superior Court during the pandemic.

This summer we will continue to build on the foundation of our successful virtual programming. We plan to take steps to improve the virtual member experience by refining and expanding our educational offerings to include CLE-accredited programs and virtual conferences. Looking ahead to the fall, we are asking our Sections, Forums, and Industry Groups to keep up their excellent work and plan for a robust slate of educational programs, with the hope that we can again convene in-person, but with the agility to proceed virtually if necessary.

Supporting the Profession

In addition to supporting continuing legal education for our members, we’re proud to be able to offer opportunities to help attorneys stay connected and well. Earlier this month, we participated in Lawyer Well-Being Week, which included a program on practical mindfulness for attorneys and a series of round tables – one targeted to legal aid attorneys and another to solo and small firm practitioners – where attendees could share their current challenges and learn about effective self-care strategies.

We’ve also been pleased to be able to assist our affinity bar partners in staying connected and reaching their membership by hosting a series of virtual roundtables and happy hours over the last few months. We look forward to continuing to offer these types of opportunities and to continuing to explore new ways of supporting wellness in the months ahead.

Graduating law students and new lawyers are entering the profession at an especially challenging time, and we are and will continue to take steps to bolster their professional growth. Our popular Friday Fundamentals series has moved on-line, and our members are continually adding more offerings to help law students and new lawyers gain the basic legal skills necessary to succeed in their practice areas.

We are also looking to meet the unique needs of graduating law students, as well as those new to practice, by expanding our Bar Coaching Program. The expanded program will offer mentorship and study support for both first time and repeat test takers as they prepare to sit for the bar exam during this time of heightened stress. The program will also now offer mentorship and guidance for new attorneys who are adjusting to the intricacies of practice from home, in an uncertain economy and without the typical in-person mentorship they would receive in their workplaces.

Finally, we know the profession will evolve and our members’ needs will change over the coming weeks and months. We remain committed to responding to those needs and helping our members adapt their practices to continue to best serve the evolving needs of their clients.

Thank you for your commitment to our mission and we look forward to continuing to serve you and all our members as we work together to meet the challenges that lie ahead.

Christine M. Netski is the President of the Boston Bar Association. She is also a managing partner and a member of the executive committee at Sugarman, Rogers, Barshak & Cohen, P.C.


Life Raft or Quicksand?: Emergency Assistance’s Role in Greater Boston’s Homelessness Crisis

by Laticia Walker-Simpson

Viewpoint

Homelessness in Greater Boston was rising even before the economic fallout from the COVID-19 pandemic. From 2008 to 2018, the region experienced a 26.7% increase in homeless families and a 42.5% increase in homeless individuals. As rents skyrocketed and the shortage of affordable housing worsened, the state’s Emergency Assistance (“EA”) shelter program has strained to meet the need of the growing number of eligible households. The public health emergency has laid bare the structural problems with the state’s housing safety net program all too familiar to those working directly with the vulnerable population.

To meet the statutory mandate to provide Shelter to impoverished households, the Commonwealth must substantially increase funding for the EA program, implement measures to create more housing affordable for extremely low income residents, and adopt initiatives to address the displacement crisis, such as right to counsel in eviction cases and rent control.

“Right to Shelter”

In 1983, Massachusetts enacted a “Right to Shelter” law, Chapter 450 of the Acts of 1983, and established the state’s first publicly-funded homeless Shelter for families while they search for more stable housing. Although referred to as a “right to Shelter” jurisdiction, the Commonwealth imposes strict threshold eligibility requirements for applicants to be eligible for EA Shelter: families must be Massachusetts residents; at least one person must have qualifying immigration status; the family must have a qualifying child under age 21, and the overall household income must be at or below 115% of the federal poverty level.

Additionally, the family’s homelessness must have been caused by one of four qualifying reasons: (1) domestic violence; (2) fire, flood, or natural disaster not caused by a household member; (3) a health and safety risk that is likely to result in harm; or, (4) eviction due to certain circumstances that are generally beyond the control of the tenant household, such as medical situations.

A household will be barred from EA Shelter for a variety of reasons, including “intentionally reducing” income to become eligible for benefits (i.e., EA shelter or a housing subsidy); receiving EA Shelter benefits in the last year; abandoning public or subsidized housing without good cause; or being evicted due to criminal activity, destruction of property, or non-payment of rent for public/subsidized housing.

Once admitted to an EA Shelter, the household must meet certain mandatory participation requirements, such as saving 30% of their income, spending 20 hours per week in housing search, job search, or in education or training programs like financial literacy classes. Participants are also required to complete chores in the Shelter, including cleaning the facilities’ kitchens and bathrooms.

A Perverse Cycle

The Commonwealth’s shortage of affordable housing for low and extremely low income families is driving the need for EA Shelter. At least three in ten low-income people in Massachusetts are either homeless or must pay over half of their income in rent.

Since 2013, the average length of stay in EA Shelters across the state is 267 days. Only 12% of families exit the EA program within one month, 28% exit within three months, and 27% stay for more than a year and up to 5.6 years. Compared to an average of 247 days in 2008, in 2013 homeless families spent an average of 300 days in EA Shelters. The duration has been about 150 days longer in the Boston and Central regions than in the Southern and Western regions. This disparity is not surprising given the higher cost of housing in Boston where, for example, the rent for a two-bedroom leapt from $1,237 in 2010 to $1,758 in 2019.

With the lengthening duration of stay in EA Shelters due to lack of permanent affordable alternatives, more families are placed farther away from their home communities and face limited transportation options to their original places of employment, child care, medical care, education, and important networks of support. And case workers assigned to each EA family face increased caseloads, reducing the time they can spend assisting each family with housing search and accessing other resources necessary to transition out of homelessness.

The budget for the EA program has not kept pace with the expanded need for EA Shelter and increased cost of temporary EA housing. In fiscal year 2013, 39,436 homeless families were served by the EA budget of roughly $156.5M (adjusted for inflation). In fiscal year 2019, 43,392 families were served by the allocated EA budget of roughly $179.8M (exclusive of any supplemental budget).

To meet the increased demand, the EA program has placed many families in inexpensive private apartments. These private market EA placements have resulted in the unintended, albeit foreseeable, consequence of further shrinking the supply of “naturally occurring affordable housing” (“NOAH”) available as permanent housing options, including for EA participants. That is, by competing in the private rental market for EA temporary placements, the state’s efforts have had the perverse effect of further decreasing the supply of NOAHs available to low-income families, thereby pushing more vulnerable households into homelessness, and exacerbating the supply barriers to permanent housing for EA participants, thereby extending their time until exit from the EA program. It is a pernicious and inefficient cycle.

The related trends of longer EA stays and shrinking permanent affordable options has transformed the EA program from its original purpose as a short-term measure to help families get on their feet into a long-term housing placement system for those with limited prospects for transitioning to stable, affordable housing. This dynamic is unsustainable at current levels of EA appropriations.

The COVID-19 pandemic has also underscored the public health costs of a system operating beyond capacity. EA Shelters are primarily comprised of congregate housing, where each family has a private room but shares a kitchen, bathroom, and living space with other families. Congregate physical facilities make social distancing impossible and contributes to the spread of the virus. The reduction in on-site staffing due to the public health emergency also means cleaning and maintenance also has come under increased strain.

Needed Reforms 

Creativity and determination are necessary, but not sufficient, to disrupt the current inefficient patterns and cycles in the operation of the EA Shelter system. A substantial increase in EA Shelter appropriations will also be necessary, along with expansion of staff trained to develop resources, capacity, and resilience within homeless families, and more systemic efforts to preserve NOAHs as permanent affordable housing options.

The most effective, preventative response to the homelessness crisis would be a form of rent control. A more immediately needed response in the face of the tsunami of evictions expected at the end of the temporary eviction and foreclosure moratorium, Chapter 65 of the Acts of 2020, is a Right to Counsel legislation that would reduce the number of low-income residents who are evicted and need EA shelter by providing attorneys to low-income tenants, the majority of whom presently go unrepresented.

The pandemic has exposed the need for systemic reform for the EA program to operate effectively to mitigate the traumatic human, medical, and social costs associated with homelessness and to transform the “Right to Shelter” from a paper promise into a sustainable reality for our Commonwealth’s neediest families.

 

Laticia Walker-Simpson is a Staff Attorney focusing on EA Family Shelter in the Housing Unit at Greater Boston Legal Services. She co-chairs the Mentor project at GBLS and is part of the Massachusetts Right to Counsel Coalition. She is an avid baker.


Massachusetts (Temporarily!) Allows Remote Notarization

by Rebecca Tunney, Kerry E. Spindler, and Sara Goldman Curley

Heads Up

On April 27, 2020, Massachusetts became the latest state to enact remote notarization and witnessing through “an Act providing for virtual notarization to address the circumstances related to COVID-19” (the “Act”). The Act temporarily authorizes the affirmation, acknowledgment or other notarial acts of documents utilizing electronic video conferencing in real time. The Act will be in effect until 3 business days after the termination of Governor Baker’s declared state of emergency. See Executive Order 591.

Under M.G.L. c 222 §16, “a notary public shall not perform a notarial act if… the principal is not in the notary public’s presence at the time of notarization.” The outbreak of the novel coronavirus (also known as COVID-19), and Governor Baker’s resulting declaration of a state of emergency in Massachusetts on March 10, 2020, have made it difficult to execute documents “in the presence of” a notary public (“notary”). This has caused problems for those who need to sign documents that require notarization, either by statute or pursuant to best practice, including many estate planning and real estate documents.

Requirements for Remote Notarizations

The Act provides a critical alternative to in-person notarizations during this period of required physical distancing. The Act also permits remote witnessing if the witness’s signature is notarized, noting that the signature of any witness who participates in the remote notarization will be valid as if the witness had been present to sign in person (i.e., witnesses under a will must still qualify under M.G.L. c 190B § 2-505). The Act still requires “wet” signatures and does not authorize electronic signatures.

Under Section 3(a) of the Act, any notarial act performed by a notary appointed pursuant to M.G.L. c 222 § 1A utilizing electronic video conferencing (“remote notarization”) will be valid and effective if:

(i) The notary and each principal are physically located within Massachusetts. “Principal” is defined as any person whose signature is being notarized, including witnesses;

(ii) The notary creates an audio and video recording of the notarial act and obtains the verbal assent of each principal to do so;

(iii) The notary observes each principal’s execution of a document;

(iv) Each principal who is not personally known to the notary visually displays federal or state issued identification bearing a photograph and signature of the principal (or a passport or other government-issued identification that evidences the principal’s nationality or residence if the principal is not a US citizen) during the electronic videoconference, and transmits a copy of the identification to the notary. With respect to any document requiring notarization and executed in the course of closing a transaction involving a mortgage or other conveyance of title to real estate (hereinafter, “Closing Documents”), Section 6(b) provides that any principal who is not personally known to the notary must also display a second form of identification containing the principal’s name (specific examples of forms of identification are set forth in Section 6(b));

(v) Each principal makes the necessary acknowledgment, affirmation or other act to the notary. In addition, each principal (a) swears or affirms under the penalties of perjury that the principal is physically located in Massachusetts, (b) discloses any other person present in the room, and (c) makes such person viewable to the notary; and

(vi) Each principal causes the original executed document to be physically delivered to the notary in accordance with the notary’s instructions.

Except for Closing Documents, the notary may sign and stamp the document upon satisfaction of the preceding (i) through (vi), at which point Section 3(b) of the Act provides that the notarial act shall be complete. Since one of the requirements for completion is the delivery of the executed document to the notary, some practitioners recommend that the notary sign the document twice: first during the videoconference after the principal signs, and again when the notary receives and collates the original documents. The notary should affix his or her seal only once, on receipt of the original documents.

Upon receipt of executed Closing Documents, the notary and each principal must engage in a second recorded video conference during which each principal verifies that the document received by the notary is the same document executed during the first video conference. See Section 3(a)(vi). The principal must again affirm to being physically located in Massachusetts, disclose any person also present in the room, and make such persons viewable to the notary. Id. Having all the originals in hand, the notary signs and stamps the Closing Document during this second video conference. Id.

In each case, the notary block must recite (i) that the document was notarized remotely pursuant to the Act, (ii) the county in which the notary was located when the notarial act was completed, and (iii) the date the notarial act was completed. See Section 3(c). To avoid confusion, the notary block may include both the date and county in which the notary was located when the principal was remotely before the notary, and the date and county in which the notary was located when the notary signed and stamped the executed originals. Id.

The notary must also execute an affidavit confirming that the notary (i) visually inspected each principal’s identification during the video conference and received a copy thereof (if a principal is not personally known to the notary), (ii) obtained consent from each principal to record the proceeding, (iii) received affirmation that each principal is physically in Massachusetts; and (iv) was informed of any person present in the room, and such person’s  relationship to each principal is listed on the affidavit. See Section 3(d). With respect to Closing Documents, the affidavit must address both video conferences.

Any will, nomination of guardian or conservator, caregiver authorization affidavit, trust, durable power of attorney, health care proxy or other authorization under the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) (hereinafter, collectively “Estate Planning Documents”) is considered complete when all original counterparts and the notary’s affidavit are compiled. See Section 3(e).

Retention Requirements

The notary must retain for 10 years a copy of (i) each principal’s evidence of identity (although there is no requirement to retain a copy of a second form of identification with respect to Closing Documents), (ii) the affidavit executed by the notary, and (iii) the audio and video recording of the remote notarization. See Sections 3(a)(iii), 3(d), 3(f).

Restrictions on Who Can Notarize

Only notaries who are licensed to practice law in Massachusetts or a paralegal under the direct supervision of such an attorney may use remote notarization for Estate Planning Documents and Closing Documents. If the notary is a paralegal (which is not a defined term in the Act), the supervising attorney must retain the required documents and recordings for 10 years. Other documents may be notarized by any Massachusetts notary. See Section 6(a).

Conclusion

The Act is the product of several weeks of analysis and negotiation, beginning almost immediately after the state of emergency was declared, among representatives from a number of bar organizations, attorneys from multiple practice areas, private industry, government agencies and Massachusetts legislators.  While there was ultimately broad support for the Act in the face of the current public health crisis, many practitioners remain wary of making such a procedure permanent given the potential for abuse.

 

Rebecca Tunney is an associate at Goulston & Storrs, P.C. She assists individuals and families with complex estate plans involving estate, gift and generation-skipping transfer tax planning, estate and trust administration, international tax planning, charitable giving and business succession planning.

Kerry L. Spindler is a Director in the Private Client & Trust practice group at Goulston & Storrs PC, where she focuses on estate, tax, wealth transfer and charitable planning, as well as estate and trust administration. She currently serves as co-chair of the Trusts & Estates Section of the Boston Bar Association.

Sara Goldman Curley is a partner and deputy chair of the Private Client Department at Nutter McClennen & Fish, LLP, where she assists clients on a broad range of estate planning, estate administration and trust administration matters. She currently serves as co-chair of the Trusts & Estates Section of the Boston Bar Association.