Any information that is unique to your company but isn’t public knowledge can be considered a trade secret and, in many cases, can be protected under both state and federal law.
As your company grows in the competitive marketplace, it becomes even more important to identify the company’s most important information, then build trade secret protection into the company’s employment policies and technology systems.
The key question to trade secret law is whether your company has taken reasonable measures to protect the secret. Companies have to be proactive and think ahead. Trade secrets, unlike other forms of intellectual property, can be easily lost and difficult to recover once they’ve slipped out the door.
Generally, any company hoping to shelter information as trade secrets should consider the following tips:
- Identify Your Company’s Trade Secrets. The first step is knowing what information in your company is the most critical. Create an inventory of trade secrets and classify them by the level of importance. Then identify what is already being done to keep the information protected. The inventory provides a baseline to ensure appropriate measures are taken to secure the information. Update this inventory periodically. The protective measures should also be revised if needed to ensure the trade secret is sufficiently protected.
- Educate Employees of the Need to Protect the Company’s Trade Secrets. Clearing polices upfront and educating employees about company rules can help avoid any unintentional leakage of trade secrets. One concrete measure is to create a comprehensive employee handbook that spells out the company’s policies. When employees understand company policies and procedures, they are less likely to unintentionally divulge trade secrets.
- Stick to a “Need-to-Know” System. In most cases, it is unnecessary for every employee of a company to know all of the company’s trade secrets. Identify those people who absolutely need to have access to the trade secret to perform his/her duties, and limit access to only those key employees. This limits exposure to a possible theft of trade secrets. In addition, other mechanisms such as non-disclosure agreements and confidentiality agreements can be used with the key employees which would require him/her to acknowledge what information is confidential and how that information may be used and disseminated.
- Implement Procedures for Incoming and Outgoing Employees. Trade secret protection should begin with any new hire. Non-disclosure and non-compete agreements are a way to protect the company’s position if a trade secret is lost or stolen. Further, it is just as important for a company to screen outgoing employees to make sure there are no trade secret leaks. Exit interviews are the standard way to figure out any physical or electronic information he/she has currently, whether there are any non-competes that will continue past his/her employment, and where the employee is going. Having this inventory will help prevent a former employee from taking trade secrets out of the company.
- Employ Effective Security Practices. For those trade secrets that take on a physical form, locked rooms or cabinets may be important. Limiting the printability of certain documents or even identifying certain documents as using restrictive legends (e.g., “Confidential”) should also be considered. For electronic information, firewalls, authentication procedures, and limited access should be employed to properly protect trade secrets.
In sum, there are a number of strategies that a company should keep in mind when protecting its trade secrets. It begins with identifying the company’s most important information and then building trade secret protection around it. The above list is a starting point, and it is not intended to be comprehensive. The practices necessary to protect trade secrets vary in complexity based on specific circumstances.