Some of the most valuable assets your company may have are trade secrets.  A trade secret can be any valuable information your company has developed and kept secret that gives your company a competitive advantage.  Since your trade secrets are valuable, it is important to develop procedures that help prevent people (like your employees) from stealing, disclosing, or using them without your consent.  These procedures will also help you to obtain a court protection if your trade secret has been misappropriated.

Disputes over trade secrets most often arise when someone leaves a company and begins to compete with his or her former employer.  If he or she uses information obtained from their prior employment, this may constitute misappropriation of trade secrets.  Corporate espionage and hacking of IT systems can also involve theft of trade secrets.  To guard against the loss of trade secrets, it is important to understand what they are and how best to protect them.

What is a trade secret?

A trade secret is information that has actual or potential economic value from not being known to the general public. Information has economic value if the owner spent time, money, and effort developing it and it provides a competitive advantage. This information is subject to reasonable efforts to maintain its secrecy.

“Information” could potentially be any type of valuable business or technical data that a company possesses, including:

• Customer information
• Marketing information and plans
• Data compilations
• Business plans and strategies
• Cost and pricing information
• Internal protocols
• Unpatented inventions
• Software
• Product development
• Formulas and recipes
• Techniques and processes

To help prove that you have commercially valuable information, keep records of how you developed your trade secret.  For example, you should document the research you performed and the efforts your company took to create the trade secret, including the money and time you spent.

A company will generally need to show some or all of the following to prove reasonable efforts to maintain the secrecy of its trade secret:

• It advised its employees of the existence and nature of the trade secret
• It informed its employees that they should keep the trade secret confidential and that unauthorized disclosure was forbidden
• It restricted access to the trade secret to those employees who needed the information to perform their job duties
• It required its employees to sign confidentiality agreements

Trade Secret Best Practices

While the types of actions you may wish to take to keep your trade secrets confidential will depend on the nature of your trade secrets and your company, you should consider adopting some or all of the following practices.

First, notify your employees about your trade secrets and advise them that they have a duty to keep your trade secrets confidential.  To accomplish this, place explicit warnings on all documents containing trade secret information stating that the document contains trade secret information, must be kept confidential, and that unauthorized disclosure is forbidden.  Place similar confidentiality warnings on computer login screens where employees can access trade secret information.  Finally, state in your employee manuals that trade secrets must be kept confidential and that unauthorized disclosure is forbidden.

Second, require computer passwords for access to any trade secret information and provide those passwords only to employees who need access to the information for their job duties.  Similarly, restrict physical access to hard copy documents.  Further, create and consistently apply policies that regulate your employees’ use of computers and other electronic media, such as email, the internet, and thumb drives.  In addition, create a system for visitors that protects your trade secrets.

Third, have all your employees and relevant third parties sign nondisclosure and/or invention assignment agreements that require them to maintain the confidentiality of your trade secrets and confirm your ownership of that information.  Finally, conduct exit interviews for all employees who had access to your trade secrets.  At a minimum, your departing employees should state in writing that they returned all company information and property to you.  Conduct an inventory afterwards.

If you need help developing a trade secret protection plan or drafting a nondisclosure or invention assignment agreement, the experienced professionals at Capobianco Law Offices can help.  If you think your trade secrets have been taken, you should immediately contact Capobianco Law Offices so we can help you protect your company by seeking an injunction and pursuing other important remedies.