How to protect your trade secrets
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A trade secret is information which is kept secret by its owner and which derives independent economic value from its secrecy. Trade secrets include a wide range of information, parts of which are not known to the public. For example, the formula for Coca-Cola is a trade secret, with very few employees knowing about the recipe.
Common types of trade secrets include technical information, such as manufacturing guides, digital designs or diagrams, or business information, such as marketing or advertising plans. They provide companies with a competitive advantage. Protecting and securing these trade secrets to prevent financial loss is paramount to keeping your competitive edge intact.
Related: Practical advice on protecting trade secrets when working remotely
You don’t need to register a trade secret for it to be protected. There is no formal mechanism for registering a trade secret. To obtain trade secret protection, you must take reasonable steps to protect the information at stake.
Coined by the World Intellectual Property Organization, the phrase “reasonable protective measures” describes the steps a business owner can take to protect their trade secrets. Although it may seem vague, the protection of trade secrets by “reasonable measures” is quite simple. This is especially useful given the current work climate of on-premises, remote, and hybrid office models.
In an office environment, traditional protections, like nondisclosure agreements (NDAs), are important. Other reasonable measures include: implementing password protection on devices containing trade secrets and locked cabinets containing paper documents containing proprietary information.
Remote team leaders can enforce policies that ensure data security, such as secure and private internet connections or provide employees with a virtual private network.
Password-protected communication platforms can also help keep trade secrets private. For example, password-protected Zoom meeting rooms or communicating through secure Slack channels can help protect important data. If employees use digital written materials, the files should be labeled so employees know whether these materials can be printed and shared, or whether they are for internal use only.
Exit interviews are an opportunity to enforce trade secret protection and remind departing employees of the NDA they signed upon hiring. Many companies require departing employees to sign a document upon termination to confirm that they have returned all confidential company information and that they will honor their obligations regarding that information.
These protections not only secure your trade secrets, but can also communicate the importance of protection to your employees.
Related: Data Protection for Small Businesses
Benefits of trade secret protection
Protecting trade secrets is a key part of protecting your company’s intellectual property. Whether your trade secrets include formulas, programs, methods, or systems and processes, protection is an essential means of protecting your company’s intellectual property.
Protecting trade secrets has a myriad of benefits. The process is usually inexpensive and immediate, with no associated fees. By taking the necessary steps to secure data, you ensure that your trade secrets are always protected.
It is important to note, however, that protecting trade secrets requires vigilance on the part of the owner of the information. Appropriate measures to ensure the protection of your company’s confidential information provide a contingency plan if this data is disclosed inappropriately.
Hijacking and ramifications
So what happens when employees leak secret information? The key is diversion. Misappropriation occurs when someone inappropriately discloses trade secrets, either by mistake or maliciously.
While suing an employee may be the last step a business leader wants to take, pursuing legal action and a embezzlement suit can be vital for business owners. This is because it may be difficult to prove later that you took reasonable steps to keep the trade secrets in question secret.
Diversion is punishable by law in the United States and abroad.
State law and federal law give trade secret holders the right to sue others who appropriate trade secrets. Remedies typically include damages and an injunction to restrain further use of the trade secrets. Federal law (and some states) may also allow the owner of a trade secret to recover attorney’s fees by filing a lawsuit.
There are more drastic remedies, especially under federal law. The US Defend Trade Secret Act, in extreme circumstances, allows a trade secret owner to bring a US Marshal into a hijacker’s residence or business and physically remove devices containing trade secrets.
What if a business owner, who owns the trade secrets, discloses protected information to someone who has not signed an NDA or other safeguards in place? This valuable trade secret protection may simply disappear and the trade secrets will fall into the public domain. If a trade secret owner does not use reasonable means to protect the secrecy of trade secrets, it will be difficult to prove the value of the information.
Related: The One Question Every Business Should Ask About Protecting Trade Secrets
The bottom line
Protecting trade secrets is an important step in maintaining your company’s competitive advantage. Using the services of experienced attorneys can help eliminate any concerns regarding the protection or disclosure of trade secrets.