Can You Keep A Secret?
Information that is important to your business is worth safeguarding. To do so, you must treat it as a trade secret and take proper precautions.
What’s a trade secret?
All information, including a process, pattern and compilation, that has economic value to your company can be classified as a trade secret. Such information is considered a trade secret to the extent that it gives you a competitive edge and you treat it as confidential.
Examples:
What protection can you derive?
Trade secret protection is forever – as long as you can keep the information a secret. For example, Coca Cola’s soft drink formula has been guarded for more than 100 years and remains perhaps the most famous trade secret to date.
Most states have laws prohibiting theft or disclosure of trade secrets based to a greater or lesser extent on the Uniform Trade Secrets Act (USTA) – model legislation governing this issue.
Two states (Alabama and Massachusetts) have their own laws on trade secret protection. Five states that have not adopted the UTSA have common law protection against trade secret violations (New Jersey, New York, Pennsylvania, Texas and Wyoming).
Usually, violations of trade secrets are civil actions for which violators can be ordered to cease using the information and to pay monetary damages (such as profits they derived from using your information). However, intentional theft of trade secrets is a crime under federal and state law and violators can be subject to severe monetary penalties and jail time.
Caution: You can’t protect against inevitable discovery – that someone else independently derives the same information without using your secrets. As with reverse engineering, another company may lawfully figure out your secrets and then use them to its advantage.
How can you keep your secrets?
To keep your information protected so that anyone who tries to use it is liable to you for damages, no formal registration is required, as is the case with a copyright or patent. You simply must treat the information as confidential and keep it secret.
Contractually restrict use of you secrets. In all your dealings, put in writing that information you disclose to another party remains a secret. Include this restriction in:
Employees are bound by confidentiality because of the nature of their relationship to you. But having them sign an agreement highlighting confidentiality of trade secrets can help to reinforce this obligation.
Take steps to lock information up. Important information should be kept under lock and key (supposedly the Coca Cola formula is housed in a bank vault). When it is stored on a computer, limit access to the information by means of a password or otherwise.
Caution: Labeling a fax transmittal as “confidential” does not establish confidentiality and won’t provide you with any protection (unless the fax relates to a prior agreement of confidentiality).
