Does your business have a carefully guarded secret that gives it a competitive advantage? The Kentucky Fried Chicken recipe, Coca Cola formula, and Google algorithm for search engine rankings are iconic trade secret examples. In your business, a new product technology, a business or marketing plan, a process, a recipe, a little-known supplier, the identity of the business’ customers or anything that is not generally known to others is valuable to the business. Protecting your proprietary information, known as a trade secret, is important for business viability, competitive position in the marketplace and its worth in a business valuation. Trade secrets are valuable assets to a business and should be carefully protected.
Trade secrets are protected by law if the business takes commercially reasonable steps to maintain the secrecy of the information. The level of protection should be in proportion to the value of the trade secret. The more valuable the trade secret, the more comprehensive the steps are expected to protect it. However, there are certain basic steps that need to be taken to effectively enforce protective measures against those who misappropriate a business’ proprietary trade secrets.
Identify and properly mark sensitive documents as confidential. If it is not marked confidential, it may be difficult to later claim the document and its contents were a trade secret.
Secure sensitive information and limit access to the data. Maintaining the secrecy of sensitive information is critical and access should be given on a need to know basis only. The following ideas can help you control access to your sensitive data. Use passwords, firewalls and data encryption. Use physical locks on rooms and file cabinets where sensitive information is stored. Keep a log of who has copies or access to critical data. If valuable enough, you may even need ID card or biometric access to areas of the building and security guards to check employees and visitors when they exit the building to be sure they have not left with confidential data. You may even implement a no cell phone policy or restrict internet and email activity outside the business intranet.
Use nondisclosure agreements with those who have access to your sensitive information. This includes employees, management, contractors, suppliers, customers, key investors and potential strategic partners. Non-disclosure agreements have certain basic element such as identification of the parties, a description of what exactly is deemed to be confidential, the scope of the agreement, exclusions to the agreement and the term/duration of the agreement.
Train your staff, consultants and contractors about your trade secret protection program. Adherence to your policies requires routine training of those who have access to your sensitive information. They need to know and recognize which data is confidential and the required steps to protect it. They also need to be trained on how to report and handle a situation of breach.
Conduct exit interviews. When terminating a relationship with an employee for any reason, it is important to conduct an exit interview and recover possession of any documents, electronic media storage (thumb drives for example), cell phones, laptops or mobile devices that may contain confidential data. Be sure to also terminate access to business computers and data by changing passwords and terminating email and access to other accounts.
Recover or destroy copies when a business relationship is terminated. When terminating a relationship with a business for any reason, it is important to recover possession of any documents and electronic media storage. Most confidentiality and nondisclosure agreements provide for this, but most businesses fail to follow through and leave their data in a vulnerable position.
To ensure protection of your trade secrets and to maintain a completive edge, a rigorously detailed system and practice will greatly help reduce the risk of your trade secrets falling into the hands of a competitor. It is critical to take these well-advised steps to protect your trade secrets, otherwise a court may find you didn’t take reasonable actions to protect them.
Tracy Jong is a patent and trademark attorney at Tracy Jong Law Firm. Tracy focuses her practice on client counseling related to patent and trademark prosecution for a range of clients including small startup companies, restaurants and bars, craft beverage companies and product manufacturers. Tracy received her J.D. from the Touro College Jacob D. Fuchsberg Law Center and her undergraduate degree from University of Buffalo in Legal Studies and Economic Geography. She has furthered her studies in chemistry with post graduate work at Brockport College and University of Illinois at Urbana-Champaign. She is registered before the United States Patent and Trademark Office, New York Bar and Western and Southern Federal District Courts of New York. He may be contacted at [email protected].