Protections for trade secrets are used by businesses to safeguard secret information that is critical for maintaining their market advantage.  Many types of information can be a trade secret including formulas, processes, designs, instrument, compilations of information, pattern, commercial method, and manufacturing techniques.

The qualifying factor for information to be considered a trade secret is that it must be used in business and must give the business an economic advantage over other competitors.  This article will explain how to protect this important type of intellectual property.

Ways to protect trade secrets

Be clear that it is a secret

It is crucial that your employees understand that any trade secrets they have learned while working at your business are confidential.  If this isn’t made clear to an employee, he or she may have a case should something like this go to court. As a result, it would be difficult for the business to sue them afterward.

Employee agreements

Employee agreements are the most effective way to prevent trade secrets from being leaked by employees.  These agreements should contain provisions which clearly designate any trade secret protections relating to your business.

Some states will require the business to define the applicable trade secrets in detail within employee agreements.  In California, for example, employee agreements must define, with reasonable precision, the nature of any trade secrets and the importance of these trade secrets to the business.  The employees must understand what the trade secrets are so they know which information should not be shared.

Non-disclosure agreements

Non-disclosure agreements (NDA) are another option for securing confidential information like trade secrets.  The NDA must sufficiently describe the material being protected and should be signed by any individual who has access to that information.  Using multiple NDAs to secure individual trade secrets gives your business a strong paper trail should a trade secret be leaked.

Using business strategies to protect trade secrets

One of the most effective business strategies for protecting trade secrets is to partially distribute knowledge of the secret to different people.  If you have a secret process for making a product that requires 5 separate steps, you would share one of the steps with five different employees.

This business strategy ensures that no single employee knows the entire trade secret or knows how to use it.  This reduces the risk of an employee accidentally or purposefully sharing your entire trade secret with other parties.

This approach can be difficult for small businesses, as they may not have enough employees to segregate a trade secret.  However, small businesses can use employee agreements and non-disclosure agreements to protect their intellectual property.

State and federal trade secrets

The United States is obligated to provide trade secret protection as it is a member of the World Trade Organization (WTO) and a party to the Agreement on Trade-Related Aspects of Intellectual-Property Rights (TRIPS).

In 2016, the trade secret protections in the United States were strengthened thanks to the Defend Trade Secret Act of 2016 (DTSA).  This gives parties a choice between localized disputes under state laws or disputes under federal law.

The main differences between the federal and state act are that federal cases will be heard in federal courts and damages may be higher.  Federal trade secret protections allow money for attorneys and double damages if the violation was willful.  Having a case heard in a federal court can allow for a quicker conclusion to disputes, although it may be a more costly process.  The statute of limitations for DTSA claims is three years from the date the misappropriation of the trade secret.

It is important to note that the DTSA provides some whistleblower protections.  If a person divulges trade secret information to government officials or an attorney for the purpose of reporting a violation of the law they will not be liable under federal trade secret laws.

Businesses are obligated to tell employees about the whistleblower protections that are available.  If they do not, they will not be able to seek attorney’s fees or exemplary damages after successful litigation against the employee.

 

Thanks for reading How To Protect Trade Secrets.  If you are interested in learning more about protecting your trade secrets, contact Stanton IP Law Firm at 813.421.3883.

 

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