Protecting your Company through Trade Secret Law

July 2016

By: Thomas McNulty 

Trade secret misappropriation is prohibited by the laws of every state, as well as by the federal Defend Trade Secrets Act of 2016. Is your information protected under trade secret law? Here are ten points you should consider.

Have you identified your company’s information that can be protected as trade secret?

Any information that is not generally known or easy to figure out, and provides some economic benefit, can be protected by trade secret law. The information need not be inventive, or even original. Information such as formulations, processes, designs, sales methods, customer lists, cost and pricing information, and other such information can qualify.

Does the information qualify as a trade secret?

The information in question must provide some actual or potential economic advantage, which is not generally a high hurdle. Additionally, it should not be reasonably ascertainable based on publicly-available information.

Have you identified the information as secret?

Clearly delineate the information you deem to be trade secret by marking documents as Secret, Confidential, or Proprietary. Segregate electronic data to confidential folders that are similarly delineated. Ensure that anyone who accesses or receives the information is aware that it should be protected.

Have you protected the information from misappropriation by your employees?

Misappropriation commonly occurs when employees take company information with them to a new employer. To prevent this, keep the information secured under lock and key. Ensure that electronic information is behind a firewall, password protected, and encrypted. Require employees who have access to such information sign confidentiality and non-disclosure agreements. Establish policies preventing the placement of trade secret information on employees’ personal computers, smart phones, thumb drives, or other devices.

Have you protected your trade secrets from misappropriation by third parties?

Often, trade secret information must be conveyed to third parties, such as contractors, collaborators, customers, and the like. Ensure that all third parties receiving trade secrets sign confidentiality and non-disclosure agreements before trade secrets are shared.

Are you preventing inadvertent disclosure of your trade secrets?

Create policies regarding disclosure of company information via social media. Review all publications and presentations by company personnel to ensure that no secret information is contained therein.

Are you taking additional steps to ensure the secrecy of your information?

The law requires you to take reasonable steps to protect the secrecy of your information. In addition to the steps above, you should restrict visitor access to your design and production areas, and require visitors to sign in with a receptionist or security guard and visibly wear a badge identifying them as visitors. Establish written policies regarding protection of trade secret information, and train employees on these procedures.

Have you considered protecting your goods and services via trade secret law rather than patent law?

If the goods and services you offer are amenable to trade secret protection, you should consider whether to protect them via trade secrets rather than patents. Trade secret protection offers several advantages over patent law – immediate effect, potentially unlimited duration, and the goods and services need not be novel or nonobvious to qualify for protection.

Have you taken steps to avoid misappropriating third party trade secrets?

Establish zero tolerance policies for violations of prior employment agreements, NDAs and the like, and obtain written confirmation of this from new employees. Create a clean-room policy with respect to new product development, and document the steps of independent development of new products. Ensure that all trade secret information received under an NDA is identified with specificity by the providing party.

Are you monitoring for potential misappropriation?

Identify employees accessing information unrelated to their jobs. Identify unhappy employees, who are more likely to abscond with your secrets, and monitor their activities. Monitor employees who work late hours or weekends and have more opportunity to access information unobserved. Note those with foreign contacts or who frequently travel to foreign countries on personal business. Monitor ex-employees’ new employment situations, and consider notifying their new employers of any NDAs or other policies to which the ex-employee is a signatory.