Are you taking the steps necessary to protect your business’s trade secrets? A type of intellectual property, trade secrets include formulas, processes, methods, or other business information kept confidential in order to maintain a competitive advantage in the market place. A trade secret can also be a secret recipe-like KFC’s “11 herbs and spices,” a mystery ingredient-like in Coca-Cola’s formula, or even “negative know-how,” such as the dead-end routes taken before lighting on the right path.
The legal definition of “trade secret” can vary, but each jurisdiction’s definition will generally share three common factors. A trade secret:
- is not generally known to the public at large,
- provides an economic benefit to the holder-a benefit gained, specifically, because the trade secret is not generally known, and
- the holder has made reasonable efforts to maintain its secrecy.
While some types of intellectual property protection, like patent protection, can be expensive and time consuming to acquire, trade secrets law enables businesses to protect their proprietary information relatively effectively and affordably. Two other big benefits of trade secrets law are 1) the holder’s proprietary information can be protected without first having to be disclosed, and 2) trade secret protection can extend indefinitely, if the confidential information is not divulged, giving the holder a perpetual monopoly in the secret information. However, one potential downside to relying only on trade secret protection is that the protection can be lost if the secret is revealed, or perhaps reverse engineered. There is also no minimum guaranteed time period that the trade secret is protected if it is disclosed.
The biggest threat to keeping your trade secrets safe is not a hacker, industrial spy, or a disloyal worker. Rather, trade secrets are most likely to be disclosed by an accidental slip or by failing to take proper means of protection. To safeguard your trade secrets, take the following steps:
Identify your trade secrets
- Prioritize the proprietary/confidential information;
- Categorize the results;
- Assess the relative risk of loss;
- Determine the steps needed to protect the trade secret;
- Promulgate a good trade secrets policy, and include it in your employee manual, as applicable;
- Develop confidentiality or nondisclosure agreements to use with a) employees that have access to the confidential information, or b) third-parties, such as independent contractors, potential investors, or licensees;
- Use noncompete/nonpoaching agreements, as appropriate, to stop ex-employees from working for and divulging your trade secrets to competitors, or from recruiting your employees to come work for them or another employer.
Have you identified your trade secrets and do you have a strategy for these valuable intellectual property assets? By making reasonable efforts-as dictated by the circumstances-to maintain the secrecy of the confidential information, you and your business can benefit from trade secrets law protections. At Fidelis Law we regularly advise business owners, entrepreneurs, creative artists, not-for profit organizations, and others. We welcome the opportunity to help you develop a strategic plan for identifying and protecting your trade secrets. Please call or email us at Fidelis Law to make an appointment or to request additional information.