Protecting Your Trade Secrets: What You Need to Know

To be legally considered a trade secret in the United States, companies must make reasonable efforts to keep information from public view. Learn more about protecting your company's intellectual property.

Protecting Your Trade Secrets: What You Need to Know

To be legally considered a trade secret in the United States, a company must make a reasonable effort to keep information from the public. The secret must have economic value and contain information that is not generally known or easily determined. Trade secrets are part of a company's intellectual property, and are a complement to patent protection. Patents require the inventor to provide detailed and enabling disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time.

Patents expire, while trade secret protection continues until the trade secret is publicly released. In order to safeguard their trade secrets, businesses must take appropriate precautions. Disclosure of trade secrets should be limited to those who need to know them, and anyone to whom the trade secret must be revealed must sign a confidentiality agreement and, when possible, a non-compete agreement. All documents or items containing trade secrets must be conspicuously marked as “confidential”.

The policy regarding trade secrets must be clearly articulated in the company manual, and steps must be taken to restrict access to trade secrets, such as issuing identification cards or installing padlocks and passwords. It is important to note that there is a group of people who cannot be prevented from using information that is protected by trade secrets law. These are people who discover the secret independently, that is, without using illegal means or violating agreements (such as confidentiality agreements) or state laws. For example, analyzing (or reverse-engineering) a legally obtained product and determining its trade secret does not constitute a violation of the trade secrets law. The Coca-Cola formula (perhaps the most famous trade secret in the world) is kept locked in a bank vault that can only be opened by a resolution of the Coca-Cola Company's board of directors. Only two Coca-Cola employees know the formula at the same time; their identities are never revealed to the public and they are not allowed to fly on the same plane.

While extraordinary measures like this are rarely necessary, companies should take sensible precautions such as marking documents containing trade secrets as confidential, locking up trade secret materials outside of business hours, maintaining computer security, and providing access to secret information only to people who have a reasonable need to know it. Every state has a law that prohibits the theft or disclosure of trade secrets. Most of these laws are derived from the Uniform Trade Secrets Act (UTSA), a model law drafted by jurists. A list of states that have adopted a version of the UTSA is provided at the end of these FAQs. In addition, the owner of the trade secret must demonstrate that the information was improperly acquired by the defendant (if the defendant is accused of making commercial use of the secret) or improperly disclosed by the defendant (if the defendant is accused of leaking the information).

In some cases, a company may prevent a former employee from working for a competitor if they can demonstrate that employment with the competitor will inevitably lead to the disclosure of trade secrets. The intentional theft of trade secrets can constitute a crime under federal and state laws. The most important federal law dealing with theft is the Economic Espionage Act of 1996 (EEA). The EEE applies not only to thefts that occur within the United States, but also to thefts outside U. S.

borders. If convicted, corporate fines can double and jail time can increase to 15 years. Ultimately, protecting your company's trade secrets requires taking reasonable precautions and understanding your state's laws regarding trade secrets. This is also an essential step in establishing a company's trade secret management program, as this prioritization helps to focus resources on protecting valuable information.

Kellie Kunkle
Kellie Kunkle

Passionate internet trailblazer. Avid travel lover. Freelance bacon aficionado. Typical food evangelist. Passionate tv aficionado.

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