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5/19/2006
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Companies Urged To Prosecute Ex-Employees For Bringing Info To Competitors

Companies can use the Computer Fraud and Abuse Act to go after ex-employees for stealing intellectual property such as customer and employee contact lists and internal marketing materials.

Employees who sign a noncompete agreement when hired, and break the agreement by leaving to work at a competitor, might want to exercise a little extra caution. Ex-employers might be able to use the Computer Fraud and Abuse Act to prosecute those suspected of stealing company intellectual property. That's according to attorneys who spoke at the Greenberg Traurig LLC Intellectual Property Summit in Newport Beach, Calif. on Thursday.

The Computer Fraud and Abuse Act, designed to protect government computers and punish hackers, has been amended and now applies to any computer connected to the Internet, said Gregory Trimarche, a partner at the influential law and lobbying firm Greenberg Traurig, whose cases range from antitrust to media and entertainment, supporting emerging companies to Fortune 500 corporations.

Sensitive data can range from detailed customer and employee contact lists to internal marketing material. Trimarche defines "intellectual property" and "trade secrets" as information that derives "independent economic value" that's not "generally known or available to the general public or competitors." An employee's know-how or talent doesn't fall into this category. The company phone list with extensions could, however.

Lawyers at Greenberg Traurig "routinely" include the Computer Fraud and Abuse Act in lawsuits brought against ex-employees jumping ship to a competitor, Trimarche said. In the past several years, he's used the statute a handful of times. "It's a new tool and just now coming into common use," he said. "When you have a new statute that gives you a powerful tool, it takes time for the legal community, including Judges, to get comfortable with it."

It's Sergio Kopelev's job to collect the evidence. Kopelev, a computer forensic specialist at LECG, which provides independent testimony, analysis and consulting services to resolve disputes, said "70 percent of people have stolen key information from work."

By looking at the metadata, employers can determine when a document was printed, Kopelev said. "You can secure the file's metadata by right-clicking on files running Microsoft Windows within the properties, for example," he said. "You also can tell when documents are copied to a thumb or flash drive. When you look at the drive forensically, the fact that someone has copies documents to a thumb drive is seen."

There is operating system metadata, software dependent metadata, some collected by the machine and others by the user. "The most pilfered items include e-mail, address books and contact lists and customer databases," he said.

Aside from taking the ex-employee to court, what's the recourse for companies that have executives who leave to work at a competitor? Vengeful employers can start yanking back stock options, Trimarche said. John Giovannone, corporate attorney and partner at Greenberg Traurig, said there's a growing trend to include a "claw-back provision" giving employers the right to terminate stock options under certain circumstances, or make the employee pay back the difference between the exercised option price and fair-market stock price. This, of course, depends on the violated provisions in company policy, and the state the company is headquartered.

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