What Everyone Should Know About Trade Secrets


Whether you are an employer or an employee, you need to know the basics of the law concerning the protection and misappropriation of business trade secrets.  What is a trade secret?  A trade secret is defined by the Uniform Trade Secrets Act as information that (1) derives independent economic value from not being known to or ascertainable by other persons who can profit from its disclosure and
(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  In plain language, a trade secret is any information a business has that is valuable, not generally known to the public, and for which reasonable efforts are made to protect its secrecy.  Common examples include business methods, processes, and plans, customer lists and contact information, product designs, pricing and financial information, recipes, formulas, manufacturing methods and processes, databases, and data compilations.

While trade secrets are protected without registration or procedural formalities, employers must still take affirmative measures to guard the secrecy of trade secret information.  Once a trade secret becomes generally known, it no longer qualifies as a trade secret and is no longer entitled to protection.  It is often inevitable that a business must reveal its trade secrets to employees in order to conduct its business.  Under some circumstances, trade secret protection may exist without a written agreement being in place.  Regardless, employers should strongly consider requiring their employees to sign a confidentiality-type agreement whereby the employees agree not to disclose or misappropriate trade secret information.

Other suggested methods of protecting trade secrets are to restrict access to trade secret information, lock up confidential information, encrypt digital information, use computer passwords, and shred documents and delete old computer files that contain trade secret information.  Software is available that can identify what and when information has been accessed, copied, or printed from computers and printers.

Employees must also be aware of the implications of misappropriating trade secrets.  Misappropriation involves acquiring trade secret information through improper means, including theft, bribery, misrepresentation, breach of a duty to maintain secrecy, or espionage through electronic or other means, and disclosing such information for economic gain.  Misappropriation often arises when an employee leaves a business to work for a competitor or to start a competing business.

Many employees are not aware that they are prohibited from taking such information when they leave employment and, as a result, improperly forward information from their work computers to personal computers or copy documents and files.  Whether intentional or not, misappropriation of trade secrets often leads to lawsuits filed by employers against former employees and their new employers to protect trade secrets and to prevent the former employees or new employers from further disclosing the trade secrets and profiting from their use.  Relief in these lawsuits can include injunctions, damages, and reasonable royalties.

 

If you have questions regarding trade secrets, please contact one of our attorneys at (402) 392-1250.