Can You Keep a Secret? Tips to Protect Confidential Company Info
Your trade secrets may be very valuable to your business and you should protect them. One of the easiest and least costly ways to protect confidential company information is to follow rules for trade secrets. Two of the best-kept secrets are the Coca Cola formula and the ingredients for KFC's chicken recipe. These companies didn't resort to government-assisted protection, such as copyrights or trademarks; they simply followed commonsense rules, and you can too.
What is a trade secret?
It is any commercial information that can give you a competitive edge. It can include: formulas, plans, patterns, processes, programs, tools, techniques, know-how, mechanisms, compounds, or devices that are not generally known or readily ascertainable by the public. Perhaps the most common trade secrets are customer lists, computer source codes, and pricing information.
Trade secrets are protected for as long as they remain trade secrets. (In contrast, patents, trademarks, and copyrights have a limited duration.) You do not have to take any formal action, such as registering them with the government.
Protective actions
The only way to keep trade secrets confidential is to be proactive about protection. Here are some key ways:
1. Advise employees about confidentiality. Have each new employee sign a nondisclosure agreement (and an acknowledgment that they read it and signed it) so they won't readily disclose your secrets to any new employer.
2. When an employee leaves the company, take steps to collect any information that may be in the person's hands. In some cases, it may be necessary to change passwords, locks, or other barriers to access. And, of course, remind the person of the nondisclosure agreement that has been signed.
3. Put up physical barriers to access. Surely, the Coca Cola formula is locked safely away. You, too, can put key information into locked file cabinets or safes.
4. Limit computer access. When trade secrets are stored on your system, limit who can access the information. Change passwords frequently to enforce this protection.
5. Use nondisclosure agreements with outsiders. If you need to share information with a potential vendor, investor, or other outsider, have the person sign a written agreement promising not to divulge or use information you disclose.
HIPAA
Trade secrets aren't the only information you want to keep private. The Health Insurance and Portability Act of 1996 (HIPAA) requires you to protect the privacy of an individual's health information. While employers are not covered by HIPAA, if they maintain group health plans for their staff, the plans are subject to privacy rules.
Many small businesses may not have given much thought to these privacy rules. However, as more businesses extend health coverage under the Affordable Care and Patient Protection Act of 2010, more attention should be given to this legal requirement. To find information about HIPAA and to what extent, if any, it may apply to your company, check HHS.gov.
Barbara Weltman, author of several books including her most recent, 1001 Deductions & Tax Breaks 2009
www.barbaraweltman.com
Copyright 2010 Author retains ownership. All Rights Reserved
