Trade Secrets

We, at Intellectual Pats, sometimes review an idea with a customer and for some reason it is determined that the idea may not be patentable, for one of several reasons (many outside the control of the customer). Does that make the idea worthless? The answer is clearly no!

However, protection is needed to keep competitors from utilizing the idea without paying the inventor for that idea.

The four basic areas of intellectual property protection are: patents, trademarks, trade secrets, and copyrights. Patents, trademarks and copyrights are covered by federal law.

Trade secrets are covered by state law and in the majority of states are covered by a Uniform Trade Secrets Act approved by that state and its courts.

Trade secrets are defined as information that has value to a company, but is not known to the general public and is maintained as a secret. Virtually any business information not generally known to the public that gives the owner of that information an opportunity to obtain an economic or competitive advantage over others that do not know the secret, will qualify for trade secret protection.

Did you know that the recipe of Coca Cola is considered a trade secret?

Protecting a Trade Secret

If the secret is disclosed, that trade secret is lost.

So maintaining the secrecy of your trade secret, be it a manufacturing process, research method, product plan, computer or mobile hardware design, software code, or virtually any other secret of the trade, is essential to protect that secret from the disclosure to unauthorized third parties. The courts have stated that if you do not protect your own secrets from disclosure, then why should the court afford you protection? Trade secret owners therefore must place a high premium on confidentiality and security of their trade secrets to be protected. Several methods of protection of trade secrets are recommended including:

  • limiting access to the secret by authorized need-to-know-employees
  • use written agreements of confidentiality and non-competition to bind employees
  • use non-disclosure agreements for business visitors
  • require the use of visitor passes and escorts
  • control document dissemination and availability, and
  • maintain physical security measures with appropriate access to restricted areas with audit trail

Companies need to put into place a policy defining:

  • What is a trade secret within your company?
  • What is the value of the company’s trade secrets?
  • How do employees and management determine what information, processes, etc. are trade secrets?
  • Does your company protect its trade secrets, including licensing and internal/external technology transfer arrangements?
  • What is considered a misappropriation of a company’s trade secret? What are the consequences of such misappropriation?
  • How do the employees know what is a trade secret?
  • Are there training processes in place to train the employees, management, and the Board of Directors in the identification, valuation, leveraging, and maintenance of the company’s trade secrets?
  • Does the company have in place a process to avoid hiring a competitor’s employee (if that employee is under a restrictive covenant)?
  • Do your employees have non-compete agreements with the company to stop an employee from leaving the company and taking your trade secret technology with them?
example of a trade secret
Coca Cola is one of the world’s most popular trade secrets.

Intellectual property audits can also help achieve the corporate objective of the identification, protection and leveraging of intellectual property assets, which often constitutes a large portion of a company’s total assets.

A trade secret can generally be enforced in state court proceedings by initiating a lawsuit and requesting the court “enjoin” any unauthorized disclosures or use of your trade secret. Damages may also be available in certain cases. In addition, most states have statutes that make the theft of a trade secret a crime.

Why Are Trade Secrets Important?

In the present business environment, the primary focus of management and a company’s Board should be the planned oversight of the company’s intellectual property in the same way any other critical assets (such as cash reserves, stock certificates, financial information, etc.) is protected by the company.

Protecting a company’s trade secrets requires more than just knowledge of the law, it is about understanding the ever-changing nature of technology and its associated business models, the growing influence of social media, and changing social norms, governmental politics (especially in a world where the US, EU, and Asia all vie for technology dominance), and the company’s own goals and objectives.

A trend away from companies relying on capital goods, to a transformation to a service economy based on intellectual property assets will continue. Companies need to be aware of the value of their intellectual property assets, whether embodied in patent, trademark, trade secret, or copyright and be prepared to protect their intellectual property, trade secret assets, and shareholder value.

Intellectual Pats has intellectual property attorneys experienced in protecting trade secrets for companies from Fortune 500 firms to start-up businesses around the world. We would be glad to provide our experienced professionals to help you license your idea. Fill out the form or call us for a no-cost 15 minute consultation!