TRADE SECRETS

Many of our clients utilize processes, formulas, or information which is not patentable, but which has value for their business. These are called trade secrets, and they can be protected from improper disclosure.

What is a Trade Secret?

Customer information can be a trade secret. Drawings, designs, and plans can be trade secrets. Supplier lists and parts ordering information can be trade secrets. Anything which has value to your company and which took considerable effort, time, and expense to obtain can be a trade secret.

The difference between patent protection and trade secret protection is:  patents give the holder a 20-year monopoly to exclude others from using their invention. Trade secrets can be used by anyone if they reverse engineer it--look at a product and figure out how to make it or how it works. But trade secrets can't be disclosed by someone who learned about the secret from a confidential relationship, which includes former employees, former corporate officers, salesmen, vendors, and potential purchasers.
 

Protecting Trade Secrets

There are several things which you can do to protect your trade secrets:

1. Decide what in your company is a trade secret.
2. Establish reasonable procedures to protect those trade secrets.
3. Make sure that all your personnel follow the procedures you have established.

What is reasonable will depend on the specifics of your operation, such as how many employees you have, and what kind of secrets you have. Some procedures which the courts have held to be adequate to protect trade secrets include:

• Mark documents as "Confidential," and include the company name on each page.
• Keep all documents which contain trade secrets in a locked place, and restrict access to those who need to use the information for their work.
• Keep track of copies of trade secret documents with log books, checkout sheets, shredding of extra copies, etc.
• Require all employees, including (especially) managers and officers of the company, and directors and shareholders of a corporation to sign confidentiality agreements, when hired and upon leaving the company.
• Require vendors to sign non-disclosure agreements before seeing your plans, drawings, prototypes, or other information.
• Restrict visitors from seeing your trade secrets in the shop.
• Contact Dykas, Shaver & Nipper, LLP for more details about what procedures to set up, and what information is considered trade secrets.

Clients Ask

A:  Many different types of information can be trade secrets: formulas, drawings, supplier lists, price and cost data, process information, marketing information, and financial information. Six factors are considered in determining if information is a trade secret: the amount of money, time, and effort spent to compile the information; the extent the information is known outside the company, the number of employees who know the information, whether adequate security procedures are taken to protect the information, the value of the information to the company and to competitors, and the difficulty of acquiring the information by proper means.
 
 

Q:   Where do I start in identifying trade secrets?

A:  Perform an intellectual property audit. This can be done with your counsel or by your own staff. The important thing is to do it. In an intellectual property audit, you need to identify what of your business information is a trade secret, what needs patent protection, and develop a plan to protect such information.
 
 

Q:  Can I prevent a former employee from using or disclosing my trade secrets after he leaves my company?

A:  Yes. If the information is really a trade secret, and you have used reasonable procedures to keep it secret, then a former employee can be stopped from using or disclosing your trade secret.
Call your Intellectual Property Attorney (us) as soon as you suspect that your former employee has used your trade secret or is going to disclose it to a competitor. We will seek an injunction permanently preventing him from using your trade secret. It is possible to recover attorney fees and punitive damages, as well.
 
 

Q:  What if he didn't take any papers, but memorized my trade secret?

A:  If what he took was general information, he is allowed to use that as a learned job skill in his trade. However, if it is specific information which constitutes a trade secret, he can be enjoined from using that information.
 
 

Q:  What if my former employee has been hired by my competitor, but I can't prove that they are using or are going to use my trade secret?

A:  If your former employee was hired to perform a job in which his knowledge of your trade secrets would inevitably be used, your competitor can be enjoined from using him in that capacity, and possibly enjoined from developing your trade secret, even by reverse engineering.
 
 

Q:  How can I use an exit interview to safeguard my trade secrets?

A:  In an exit interview, a company representative can discuss an employee's obligation to protect a former employer's trade secrets. The departing employee can sign an acknowledgement of this review, and agree not to disclose or use the company's trade secrets. The exit interview form can also note that all copies of company information have been requested to be returned, and the departing employee has returned them.

Q:  What if my former employee ignores the injunction, or hides his continuing violation of it?

A:  An investigation performed with legal counsel can often provide proof of lack of compliance with a court order. If evidence is found, we can seek a contempt ruling. If proven, the violator of a court order can be fined for violation of the court order.
 

The first step in protecting your business and trade secrets is to contact Dykas, Shaver & Nipper, LLP before a violation occurs. The sooner action is taken, the more your trade secrets can be protected. Call today for a confidential consultation at (208) 345-1122.

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