Trade Secret protection can be vital to a small business.
I had a client that owned an e-commerce/marketing business. Computer code, client lists, and marketing plans were valuable trade secrets for this client. The former president decided to quit the company and start his own business. In fact, his business was going to be exactly the same as his former company’s business – direct competition.
Needless to say, litigation in federal court ensued with allegations of the president violating trade secrets. The former president had cleaned out his office, taking substantial marketing materials, client lists, and other valuable information. This included the only copy of his signed, employee confidentiality agreement.
Trade secret law is an avenue of intellectual property law that covers items that cannot be copyrighted or patented, or shouldn’t be. Often, a business will have competitively significant information that does not meet the requirements for patent protection. Similarly, copyright protection may also be unavailable because copyright law protects the expression of an idea, not the idea itself. Moreover, the information often is of a type that the creator does not want to make it public (as required by patent and copyright laws). In such a situation, trade secret law will provide the necessary protection for this information.
Trade secrets cover a broader area of law than patents or copyrights. Unlike the limited time protections of patents and copyrights, trade secrets, with the proper protections, can last indefinitely. Some notable trade secrets include: the “secret formula” for Coca-Cola and the “secret recipe” for Kentucky Fried Chicken.
Factors for determining a Trade Secret
Some of the more common factors in determining a trade secret are:
1. The extent to which the information is known outside of the owner’s business;
2. The extent to which the information is known by employees and others involved in the owner’s business;
3. The extent of measures taken by the owner to guard the secrecy of the information;
4. The value of the information to the owner and to his competitors;
5. The amount of effort or money expended by the owner in developing the information; and
6. The ease or difficulty with which the information could be properly acquired or duplicated by others.
It’s called a trade “secret” for a reason
Remember, in order to claim you have a trade secret; you must be taking steps to keep it a “secret.” This is where employee agreements with confidentiality clauses become so essential. Make sure everyone in your business has signed an employee agreement that includes a confidentiality clause. Also, make sure the signed copies are kept someplace where no one can abscond with them.