How can the Illinois Cannabis Industry Protect its Trade Secrets?

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How can the Illinois Cannabis Industry Protect its Trade Secrets?

While there are federal laws that protect a company’s trade secrets, it can be difficult for a medical marijuana dispensary to protect itself because marijuana remains illegal under federal law. For example, the Federal Defense of Trade Secrets Act (“DTSA”) provides companies with protections when an employee misappropriates a company’s trade secrets, but the DTSA likely will not be helpful to an Illinois medical cannabis business. And because legalized cannabis companies are relatively new – especially in Illinois – it is further unclear what protections state courts in Illinois will provide to businesses.

Nevertheless, companies can take precautions to maintain a competitive advantage. Confidentiality and non-disclosure agreements can help alleviate the risk that a former employee will provide a company’s key information to a new employer (or use it in a new business the employee starts). And courts are likely to enforce these agreements because they typically do not prevent an employee from working for a new company. But to be enforceable, the employer must ensure that it is sufficiently keeping its information “confidential.” For example, employers should have IT security protections in places, such as password protection, encryption, and firewalls if they want courts to enforce these agreements. Such technical protections minimize the risk that confidential information will end up in a competitor’s hands, and demonstrate that the company truly considers the information to be sensitive. Courts also want to see that companies are vigilant in seeking to enforce these agreements once they learn of potential violations.

Businesses can also try to rely on non-compete and non-solicitation agreements to protect their interests. These agreements attempt to prevent a separated employee from working for a competitor for a reasonable period of time within a certain geographic radius. They can also prevent a former employee from soliciting a company’s clients. But the current legal landscape surrounding cannabis makes it unclear whether these agreements are enforceable for cannabis businesses. Smart companies, therefore, will rely on narrowly drafted agreements to minimize a court’s concern and thus increase the likelihood that the agreements will be enforced.

An additional line of protection in Illinois is the Illinois Trade Secrets Act (“ITSA”). Similar to the federal DTSA, the ITSA prevents a former employee from misappropriating a company’s “trade secrets.” The ITSA might provide protections for marijuana companies.

Because of the intricacies of state and federal law, it is important to work with experienced attorneys to help implement protections to safeguard your business. Attorneys at The Prinz Law Firm have a wealth of experience in creating agreements to protect a company’s interests and confidential information, and in litigating related claims.