Timeless Advice

Steps You Should Take to Protect Your Company's Trade Secrets

You must take steps to protect for your company’s trade secrets both to reduce the likelihood that your confidential information will be misappropriated and also to make it easier to protect your trade secrets in court if they are stolen.

In one form or another, the Uniform Trade Secrets Act (the "Act") has been adopted by the majority of states and the District of Columbia. The definition of "trade secret" varies slightly from state to state, but in general it protects a formula, pattern, compilation, program, device, method, technique or process, that:

  1. derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
  2. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Therefore, if you fail to take efforts to maintain the secrecy of your trade secret, you may be unable to protect it in court.

What The Act Protects

The information protected is extremely broad. It includes almost any information that gives a business entity a competitive edge by virtue of its not being known to competition, including manufacturing processes; the formula for manufacturing a product; software; customer lists and information; general corporate strategy; business plans; and marketing techniques.

The information must be secret and the subject of efforts that are reasonable under the circumstances to maintain its secrecy. As long as the company makes "reasonable efforts," but the secret is somehow exposed, protection is generally available under the Act.

Although the Act explicitly indicates that not every employee and every person must receive express notice of the trade secret status of every piece of information - an impossible standard - this is the goal to which you should strive. The standard of "reasonable efforts" to maintain secrecy is far more easily stated than implemented, as illustrated by the many cases where trade secrets have been lost by failure to meet this test.

1. Identify and Label Your Trade Secrets.

Specifically identify each piece of information you wish to protect as a trade secret. Do not be overly inclusive by claiming protection for trivial mattes as this will undermine protection of your true trade secrets. Establish an ongoing system to identify new trade secrets. Label all documents which contain or reflect trade secret information as CONFIDENTIAL.

2. Treat Your Trade Secrets As Secret

Treat the documents as secrets by limiting copies and, where appropriate, register document numbers and require the return of such information either when the task is completed or on demand. Limit access to the information to only those employees with a need to know.

3. Educate Your Employees To Identify Trade Secrets and Protect Them

Educate employees as to which information the Company considers trade secrets and on the Company’s procedures to keep the information confidentially.

Hold periodic training sessions for your employees to remind them of these rules and to publicly note and correct sloppy practice.

4. Require Confidentiality Agreements From Anyone Who May Contact Your Trade Secrets

Require all employees with contact to your trade secrets to sign confidentiality agreements and, if appropriate, covenants not to compete. Make sure those agreements are: (a) backed up by adequate consideration; (b) reasonable in scope and nature; and (c) require the departed employee to advise his/her new company of these restrictions. Such agreements should be required from consultants, temporary workers, prospective purchasers, business partners, distributors, licensees, vendors, customers, and anyone else who might be given access to your trade secrets.

7. Implement Security Measures

Implement security measures which might include secure zones, badges, security guards, passwords, and locked cabinets and limit access to your company's facilities. Make visitors sign in and out, wear badges, and, if appropriate, sign confidentiality agreements. Prohibit cameras, tape recorders, and similar items. Monitor computer notebooks.

Create procedures to keep computer files confidential and limit access by passwords, fire walls and other measures which become available.

Conduct periodic trade secret audits to check for leaks.

Establish and update written policies and manuals for protecting your intellectual property, including trade secrets. Require your employers to read, understand, and comply with these policies. Correct, censure, reprimand and/or discipline employees violating these policies.

Use different vendors for different components, and do not disclose how the parts relate or any final product information.

Be aware that outside the U.S., trade secret protection varies widely from some to none. In some countries, espionage to customarily used, totally legal, and culturally accepted

8. Carefully Control Outside Communications

Be very careful that trade secrets are not unwittingly disclosed in advertising or marketing information. Be careful about training materials, professional publications, and presentations at trade shows or conferences.

9. Address Confidentiality When Employees Leave or Relationships Terminate

Hold exit audits with departing employees and consulatnats whose contracts expire or terminate at which you obtain the return of all secret information and an acknowledgment from the employee of compliance with non-compete, non-disclosure, or other obligations. Note that certain severance payments or benefits may be conditioned upon such continued compliance.

When a relationship ends with a partner, distributor, vendor, supplier, manufacturer or customer, specifically address the confidentiality requirements and obtain a return of all materials relating to trade secrets.

10. When in Doubt, Contact Your Legal Advisors

You may not always know if something can be protected, how to best protect it, how to conduct an investigation, especially where employee theft may be an issue, or when or how to enforce your rights. These are times to contact your attorney and act on professional advice. Don’t guess or assume, seek legal counsel.

If you discuss these steps with your Company's employees and related parties and ensure that most or all of them are implemented, your trade secrets will be less likely to be stolen,.and in the event they are stolen, the court will be more likely to award your company injunctive relief and damages.