Protecting Trade Secrets

Column by Steve Strauss

Trade secrets are proprietary information used in the course of business to gain an advantage in products or services. A trade secret can be a formula, a device, patterns, techniques, sales forecasts, customer lists, manufacturing processes, databases, spreadsheets, or any other compiled information that has a specific business application. To be a trade secret, the information must have economic value, it must be kept secret, and that secret must be protected.

When a court determines if something is a trade secret or not, it normally looks to two factors:

1. The degree to which you take steps to protect the information, and

2. The ease of getting the information from other sources.

How to protect them

If you have information that you want kept confidential, then you must take precautions to keep this information secret. Here's how:

• Be sure to lock all confidential documents in a secure location.
• 
  
  
• If the information is stored in a computer, make sure people who need to access it have to type in a password.
• 
  
  
• Establish policies that can be used to identify and maintain your trade secret information. For instance, stamp all documents that you consider trade secrets "confidential." Also, carefully limit the number of copies that can be made.
• 
  
  
•  Dispose of trade secrets carefully. Shred them. Burn them. Whatever you do, don't simply throw them away with the other trash. Have every employee sign a document at the time they are hired that forbids them from giving out your confidential, proprietary trade secrets, both while they are employed by you and after they leave your company. This way, everyone will know what is privileged information, and everyone will clearly know that they have a legal duty to keep it confidential. During any exit interview, reinforce the confidential nature of your trade secrets. Why do all this? Because in the event you ever have to sue, you will need to prove to a judge that these documents really were a secret. You must treat them as such.

You have to be able to demonstrate, if the need ever arises, that you took every conceivable precaution to maintain the confidentiality of your trade secrets. If you do that, not only will employees be far less apt to spill the beans, but you will be in a better position than if you hadn't taken these precautions.

Back to top

---

LIMITATIONS. The information contained in this article is for general guidance. Such information is provided on a blind-basis, without any knowledge as to your industry, identity, or specific circumstances. The application and impact of relevant laws will vary from jurisdiction to jurisdiction. There may also be delays, omissions, or inaccuracies in information contained in this site. The information on this site is provided with the understanding that Staples.com and its affiliated entities, and various authors and publishers providing such information are not engaged in, and that providing such information does not constitute the rendering of, legal, accounting, tax, career, or other professional advice or services. As such, information on this site should not be relied upon or used as a substitute for direct consultation with professional advisors. Please refer to our Legal Terms and Conditions for further information.

Legal disclaimer