Impact | Business Risk Management Blog

A recent decision from the Seventh Circuit is a reminder that if a business wants trade secret protection for certain information, it must actually implement reasonable measures to protect the secrecy of that information. While what is “reasonable” depends on the facts of each case, a business should take basic steps such using confidentiality agreements with employees and third parties, marking of documents with “confidential” stamps and restricting access to and securing documents that are or contain confidential information. While these steps may seem obvious, the failure of the plaintiff in this case to take these steps allowed the defendant to design a product similar to plaintiff’s product and freely compete against the plaintiff.

The officers and directors of a corporation are vested with broad protection in the management the entity’s affairs. This broad discretion can make it difficult for minority shareholders to ensure that those with majority control, often serving as the corporation’s management, are operating the entity to maximize value as opposed to promoting individual self-interest. However, the August 2014 decision by an Illinois Appellate Court in Sunlitz Holding Company v. Trading Block Holdings, Inc. shows that shareholders of Illinois corporations are not without protection. Shareholders are entitled to inspect an Illinois corporation’s books and records without proof of wrongdoing or mismanagement. Instead, assuming that a shareholder can articulate a “proper” purpose underlying the demand that goes beyond what may be termed “curiosity,” such review can be obtained – and on an expedited basis - even when the shareholder is not possessed of evidence of improper conduct by the officers and directors .

In a surprise move, on Oct. 6, the U.S. Supreme Court decided to not decide one of the most anticipated cases of the year. No, not the much ballyhooed same sex marriage cases the Supreme Court declined to decide.

The other surprise move by the Supreme Court that same day; little noted by the media; is that the Supreme Court also passed up a chance to rule in what is probably the most important Foreign Corrupt Practices Act (“FCPA”) case of the last 10 years. Esquenazi, et al. v. USA, Case No. 14-189.

Business Tip: Include a liquidated damages clause in your restrictive covenant agreements that clearly sets forth how damages will be calculated in the event your employee breaches the non-competition agreement.

As a President, CEO or General Counsel of your company, you have recognized the need to have your key executives and employees enter into non-competition or non¬-solicitation agreements. Those non-competition agreements are usually a cost effective way to stop your key executives and employees from competing against when they leave your company. However, in those instances where you have to go to court to enforce your non-competition agreement, the experience can be costly, in terms of attorneys' fees, your time and your company's resources.

Business Tip: Include extension clauses in your restrictive covenant agreements to ensure that the time of the restrictions will not begin to run until the employee has stopped violating the restrictions.

In order to make sure that an employer gets the full benefit of the restrictive time period in its non-competition, non-disclosure or non-solicitation agreements, employers in Illinois should make sure that such agreements contain "extension clauses." Extension clauses will extend the time period or modify the start date of the restrictive covenant in the event that an employer does not discover the former employee's breach until near the end of the restrictive time period or the employee continues to violate the restriction during litigation.