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Cloudy with a Chance of Trade Secrets: Ensuring Trade Secret Protection for Data Stored in the Cloud

Cloud storage is easy to set up, very shareable, accessible on an iPhone, and thus commonplace in workplaces across the country. The use of this technology, however, poses unique challenges for maintaining the confidentiality of employer data under trade secret laws.

Apart from the obvious risk of theft from the cloud — for example, a disgruntled employee might access the cloud on a personal device and download documents — the cloud makes access to information easier, which could eat away at, or destroy, legal protection for that information. Under many states’ (including Texas’) trade secret laws, information does not receive trade secret “status” unless its owner takes identifiable steps, which are reasonable under the circumstances, to protect that information.

I continue to see cases in which poor controls over a cloud storage system put the trade secret status of an employer’s information in jeopardy. A common fact pattern: company sues former employee for trade secrets misappropriation and breach of an NDA, claiming that after the employee’s termination they accessed the company’s Google Drive/iCloud/Office365 or similar account and downloaded its documents.

You don’t want to be in a situation where a terminated contractor or employee has access to the company cloud account after their time with the company is over. To that end, a good first step in securing your company’s information is a policy ensuring that cloud access is promptly shut off for departed workers.

To help deter trade secrets theft and bolster arguments that information has trade secret protected status, companies should also consider policies such as need-to-know access control guidelines. It’s a tough balancing act — convenient, remote access to company data increases productivity, but use of cloud sharing technology should be carefully deployed. It’s a short and slippery slope for information to go from protected and “secret” to “public,” and thus unprotectable.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.