What Are Trade Secrets?
Oxford dictionary defines trade secrets as: A secret device or technique used by a company in manufacturing its products. To dive in deeper, trade secrets are intellectual properties (IP) that include formulas, practices, processes, designs, instruments, patterns, or compilations of information that have inherent economic or pecuniary value. They are not known by the general public and are not readily ascertainable by others. The owner of this type of IP typically will take reasonable action to keep it a secret.
The 3 main components of a trade secret are as follows:
- It is confidential information.
- It has economic value because it is unknown to others.
- Its owner has made reasonable efforts to keep it secret.
In general, trade secret protection grants owners the right to prevent the information from being disclosed, taken, or used by others without the owner’s consent.
What Is Trade Secret Theft?
Trade secret theft occurs when someone knowingly steals or unfairly takes a trade secret to the economic benefit of anyone other than the original owner. These thieves can be from both inside and outside of the organization that they steal from.
5 Steps To Protect Trade Secrets
Did you know that one 64GB flash drive can hold approximately 4 million pages? It would take an 18-wheeler to carry the physical copies, but a pocket-sized flash drive can be used to whisk away 4 million pages worth of company secrets. It’s that easy and that’s why it is so important to protect your trade secrets. The U.S. Patent and Trademark Office estimates $250 billion in losses due to trade secret theft.
Typically, you need to protect your IP from these 3 parties:
- Thieves – They want to take your intellectual property for personal gain.
- Competitors – They want your intellectual property to outdo or compete with you.
- Adversaries – They want your intellectual property for the purpose of putting you out of business.
To protect yourself and your business against trade secret theft, implement these 5 steps.
- Register the copyright, trademark, or patent for your IP
- Protect your IP from within the business
- Limit access to IP (both physical and digital)
- Identify and assess risks
- Train employees & vendors as needed
Copyright, Trademark, or Patent Your IP
Depending on what type of intellectual property you have created, it will most likely need to be protected in one of 3 ways, or a combination: a trademark, a patent, and/or a copyright. For example, computer software is eligible for copyright protection because it is text; however some believe to keep it confidential it should remain a trade secret, while certain versions of code may express novel processes that arise to the level of patent protection.
Protecting your intellectual property prevents anyone from using it without your knowledge and permission. It also creates a presumption (in Latin, prima facie) of ownership, and that you are compensated properly for your work.
Trade secrets, if protected by a patent, are no longer a secret after they publish and/or grant. Patents protect novel inventions that are non-obvious to one skilled in the art. Inventions can be anything with a utilitarian or functional purpose: from a machine to a hybrid plant to chemical compositions to business methods.
A patent will grant you the right to produce your invention without the worry of competitors replicating it for the duration of the patent’s protection.
More examples of what a patent will protect are phone applications, pharmaceuticals, engines, and even plants.
There are 3 different types of patents:
- Utility patents
- Design patents
- Plant patents
In basic terms, utility patents protect a new or improved process, machine, or composition. Plant patents protect asexually reproducible plants and new plant characteristics. Design patents protect unique looks or designs, for example, the curvy structure of a Volkswagen Beetle or women’s underwear.
Protect Your IP From Within the Business
The first line of defense against trade secret theft is confidentiality and non-disclosure agreements (NDAs) with employees, business partners, and anyone else who has access to the IP.
Policies and procedures should be in place to support confidentiality and they need to be followed consistently.
PatientPoint health information services lost a case against a former employee who used information he had access to help a competitor. They had not asked for an NDA until one year into his employment and hadn’t asked him to return his laptop until six months after his termination. Therefore, PatientPoint hadn’t taken “reasonable steps” to secure its trade secrets.
Limit Access to IP (Both Physical and Digital)
It is vital to have security for both physical and digital intellectual property. More and more, courts are requiring it, ruling that if the information is deemed secret, the company must take action to implement physical and electronic access restrictions.
The information technology security system should also be regularly assessed and updated.
Identify and Assess Risks
Make sure you, first, identify what information should be kept confidential. Trade secrets should be documented internally. Once the trade secrets have been identified, risk assessments should be run to determine what information is at risk, is most vulnerable, and could do the most damage in the event it was stolen. Are there particular departments within the company that are more at risk, such as salespersons with access to customer lists, vendors, and other third parties valuable to the business? Make sure measures are taken to better secure those areas.
Train Employees & Vendors As Needed
Both third parties and employees should be trained so that they know exactly what is expected of them when handling Confidential Information. Companies that fail to inform their employees what is and isn’t confidential in their training have been known to lose cases against employees who have stolen trade secrets.
How Morin Legal Can Help You
Morin Legal has 18 years of experience in intellectual property (IP) law. Of that, we have ten years of experience in United States trademarks, copyrights, and trade secrets. Coupled with a background in patents and working relationships with a global network of IP attorneys, we identify your ideas, creations, and brands and develop a strategy to help you to fiercely protect them.
We also offer guidance for developing and maintaining a portfolio of your intellectual property assets for the long-term success of your estate.
We offer copyright, trademark, and trade secret IP legal services as well as guide you in how to develop and maintain an IP portfolio.