Trade secrets are proprietary pieces of information, unknown to others, that give you an advantage over competitors. While thoughts of trade secrets often conjure such iconic examples as the formula for Coca-Cola or Colonel Sanders’ “11 herbs and spices,” they can be far more mundane. However exotic a trade secret might be, all businesses have them and the central key to protecting them is keeping them confidential. This post will show some of the steps that can be implemented to ensure protection of your proprietary information.
- Create Processes to Identify Trade Secrets in the First Instance
As noted, trade secrets are things not generally known outside your organization that provide you with an advantage over competitors. While trade secrets can take many forms, the cornerstone is they are meant to be confidential. Trade secrets can include, among other things, recipes and formulas, process steps, customer lists, supplier information, pricing schedules, forecasts, business plans and prototypes. The key consideration is they are things you want kept hidden from competitors.
Because information that might be eligible for trade secret protection can take such different forms, it is important to always have a plan in place to recognize these materials as they are created. By recognizing what might be considered a trade secret early, the chances of properly protecting it from an unintended disclosure go up exponentially. Therefore, you should consider all ideas and work product as potentially protectable and monitor them as such.
- Limit Internal Disclosure
Trade secrets are only valuable if they are kept confidential. The more people that know of a secret, the less clear it becomes that the information is indeed secret. Keeping confidentiality might mean only letting people in on half the secret. For instance, the Coca-Cola formula is kept in a vault and legend has it that no single employee knows the entirety of the recipe. This makes each bit of the formula more secretive and more valuable. Therefore, limiting access to proprietary information among employees, locking information up physically and/or by computer password, providing access only on need-to-know bases or even spreading pieces of information among several employees can demonstrate the confidentiality of that information and help render it protectable.
- Utilize Written Non-Disclosure Agreements
Informal Non-Disclosure Agreements can be ineffective (as we discussed in “The Pitfalls of Informal Confidentiality Arrangements”). Mere oral promises to keep information confidential are often insufficient to actually protect that information. Therefore, it is important to have — and use — a broad and enforceable written Non-Disclosure Agreement to help ensure protection of trade secret information and to provide a basis for a cause of action against a party who violates that agreement by using or disclosing your secrets.
- Make Sure Key Employees Operate under Non-Disclosure and Non-Compete Agreements
Invariably, there will be one, two or even more employees in your organization who will know the company’s secrets. Also invariably, from time to time these employees will move on, some possibly even to competitors. While in your employ, these people may have been bound by employment or other agreements requiring they keep proprietary information confidential. However, when they leave, they are usually no longer subject to such restraints. Therefore, even in the early stages of employment, some consideration should be given to limiting post-employment behaviors. Thus, as a condition of initial employment you can potentially require an employee to promise that they will not work for competitors after leaving your firm. Similarly, you can require assurances that employees will not utilize confidential information learned in your employ in subsequent employment. While determining the exact scope of or enforceability of such agreements is a more detailed issue, we suggest that you should at least consider this in the early stages in order to ensure future protection of information.
- Rinse and Repeat
Business is fluid and much business survival rests on adapting to changes. In terms of trade secrets, new products can be developed, new markets exploited, new employees hired and new third-party relationships forged. Putting steps and procedures like those above in place and continually implementing them will help identify and protect confidential information and help ensure important proprietary information is not lost.