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What are Trade Secrets and How Can You Protect Yours Legally?

By John DiGiacomo

Trade secrets are business information and data that derive economic value from the fact that they are kept confidential and secret. Under both federal and state laws, if an owner takes “reasonable” steps to protect the information/data, then legal action can be taken against anyone who steals — misappropriates — the information/data. Trade secrets can be exotic or mundane. An exotic trade secret might be something like a “secret formula” while a mundane trade secret might be data maintained on a spreadsheet containing client/customer names and contact information. As noted, the key to being legally protected is that there is some commercial value created by the fact that the information/data is kept secret.

In general, trade secret protection does not extend to information/data that is in the public domain. Thus, trade secret protection can be lost if previously secret information is voluntarily disclosed or allows open access to the information/data. For this reason, information/data that forms the foundation for the grant of a patent cannot be a trade secret since the information/data had to be publicly disclosed in the patent application. Allowing free access to trade secrets will also “destroy” a trade secret. In one reported case, the owners of various trade secrets about their business method/model disclosed that information in numerous Zoom teleconference meetings. However, the company had no effective controls on who participated in the Zoom teleconferences. Allowing such free access was considered to be a voluntary disclosure to the public by the court.

How to Protect Trade Secrets

From these principles, several methods of protecting trade secrets become obvious. These include:

  • Establish protocols for physical security and cybersecurity — an overly lax or laissez faire approach to physical security and/or cybersecurity can be deemed a form of voluntary disclosure or can be deemed as some evidence that the data/information was never considered “secret”
  • Limit authorized access — obviously, the general public should not have access to trade secrets and neither should every employee at the company; limit the number of people who have authorized access to trade secrets; only those that need access should have access
  • Use nondisclosure and confidentiality agreements when trade secrets are disclosed — all persons being allowed access to trade secrets should be signing such agreements; this prevents a court from holding that trade secret protection was “lost” due to voluntary disclosure

Within each of these broad categories, there are more specific policies that should be established. For example, with respect to physical security, a company should identify where trade secrets are located like in filing cabinets, in computer systems or on mobile electronic devices. Physical, remote and wireless access to the location of the trade secrets should be controlled and policed. Among other things, this entails knowing to whom a mobile device, for example, has been given and ensuring that the device is returned when the employee no longer needs access to it or if the employee is separated from the company. As another example, confidentiality agreements should include training on how not to accidentally disclose trade secrets to third parties. If you have questions about protecting your trade secrets or if you need to initiate trade secret litigation, contact the trade secret lawyers at Revision Legal at 231-714-0100.

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