Who Wants (or Needs) To Know? How to Protect Your Trade Secrets

We have all heard of trade secrets–things like the formula for Coca-Cola, WD-40, or the filling of Twinkies.  Trade secrets are much more than recipes, however.  They include things like the New York Times methodology for what constitutes a best-seller, which the company intentionally protects as a trade secret.  But what qualifies as a trade secret?  How “secret” does it have to be?  Your company or business venture may have, and may have already lost, a number of trade secrets without even knowing it.  Learning what they are, how to protect them, and their value can bring big benefits to your business.

What is a Trade Secret?

In a general sense, any confidential  business information that provides the business with a competitive edge and, as a result is valuable, may be considered a trade secret.  As mentioned above, recipes, formulas, manufacturing processes, customer lists, advertising strategies, and other private business information can be a trade secret.  It is an unfair practice and a violation of trade secret law for such information to be used by an unauthorized person, so identifying and protecting trade secrets is an important step for any business.

What Rights Does a Trade Secret Owner Have?

A trade secret owner can prevent unauthorized people from accessing, copying, using, or otherwise benefiting from its trade secrets or disclosing them to others.  People who knowingly obtain trade secret information or even learn about a trade secret accidentally but had reason to know that the information was a protected trade secret can be preventing from disclosing that trade secret.   Essentially, the only group of people that cannot be prevented from using information protected under trade secret law are those who discover the secret by independent means, meaning without use of illegal means or violating any agreements or state laws.  This can include practices such as “reverse engineering” a product that was lawfully obtained to determine its trade secret elements or formula.

 How Do I Protect My Trade Secrets?

Unlike copyrights, patents, and trademarks, which may be protected through registration, trade secrets do not have a registration process and are protectable without following any apparent legal formalities.  As such, a trade secret can theoretically be protected for an infinite period of time, but they are only protectable so long as they are subject to reasonable procedures intended to guard their secrecy.   A business must affirmatively be able to demonstrate that it took measures to keep its trade secret, in fact, a secret.  There are many actions a business can take to demonstrate this intention.  For example, having agreements in place with any individuals who may come to know trade secret information by virtue of their employment or work they do for or with your business, known as nondisclosure or confidentiality agreements, are a good basic measure to take.  These agreements require people to promise not to disclose trade secrets without authorization, and they are a good way to establish whether someone was aware that particular information was information that should not be disclosed.  Keeping information physically under lock and key and limiting access is a commonly recognized effort to maintain secrecy.  Courts will consider the efforts taken as a whole, including whether documents are marked “Confidential,” whether information is shared freely, the use of passwords, and other such measures.

Most Importantly – Who Needs to Know?

While nondisclosure agreements and a multitude of other efforts can be put in place to demonstrate a business’s efforts to characterize something a trade secret, one of the simplest and most important ways to protect trade secrets is to ask yourself one question, “Who needs to know?”  Is it necessary for the janitor to have a key to the office where business records are kept?  Does every employee need to have administrator access to your company Facebook page?  Limiting exposure of different tiers and types of information to those purely on a need-to-know basis will go a long way in effectively protecting trade secret information and ensuring information is not spread further than necessary, in addition to preventing a whole host of other problems in the workplace.  If only a few individuals have access to particular materials, it is much easier to determine the potential source of any related problem that may arise.

Before you decide who needs access to the closet, who you need to execute a noncompetition agreement, who can access the company computer files, who is the source of unauthorized access to your trade secret information, or who simply wants to know – ask yourself “who needs to know”?