Articles


Should I Consider Trade Secrets?
Mark Levy

From the recipe for Greek Fire used by navies of old, to computer-encrypted messages of today, secrets that are well-kept can impart their owners power, influence and even great wealth.

So how good are we at keeping secrets? Governments and many businesses are pretty fair at it, but we sometimes hear of huge lapses. Yet most individuals aren't good at secret keeping because they simply don't know how to, or try very hard to, keep the cat bagged.

It doesn't have to be. These days we have a pretty powerful tool for protecting one's trade secrets - the Uniform Trade Secrets Act (UTSA). Adopted in 1979, it outlines what you may deem a trade secret, how to protect yourself, and how to remedy a loss or theft.

Under the law, two ingredients define a trade secret:
    1) The information really is a secret. That should be obvious, but the point and the war have been lost if hundreds of people know it, even if they're sworn to secrecy.
    2) The information gives you a competitive advantage.
Trade secrets can be anything from a formula for motor oil, or a process for making chocolate chip cookies, or a checklist for writing operating system software. But they also might be things like customer or contractor lists, or even pricing sheets - anything secretive that gives you a competitive advantage for building, selling or using a product or process.

How long is a trade secret protectable? As long as the information fits the two-part definition above. The duration can be moments. In the case of making fine wines or musical instruments, it might be centuries. Or as some have suggested, it's forever, as long as the information meets the criteria.

Putting it in place

Always remember a trade secret is protectable under UTSA so long as secrecy is maintained. That's easy to say and sometimes hard to do. But it's up to you. Here are three areas upon which people must focus when creating and maintaining trade secrets.

1) Establish physical security
  • Whenever possible, keep secret information in a locked room or filing area separate from other areas
  • Limit areas to badge access, which restricts access and records entry
  • Create sign-in and sign-out logbooks
  • Look for confidential materials out of place
  • Periodically clean or organize files
  • Shred outdated materials
2) Limit employee access
  • Establish non-disclosure agreements
  • Notify employees of policies
  • Conduct training on procedures, and preventing infringement
  • Prohibit copying of sensitive materials
  • Limit public tours
  • Forbid cameras and recording devices in sensitive areas
  • Review technical papers and photos prior to publication

3) Fortify computer security
  • Create password procedures
  • Immediately deactivate passwords of departing employees
  • Create 'read only' electronic files containing sensitive material
  • Discourage personal use of email on work computers

Just who determines what a trade secret is, and the extent to which it should be protected? The law doesn't say. Usually, a company's top people will come up with a competitive advantage they believe must be kept under wraps.

Unfortunately, some businesses go too far. Years ago I worked for an international company with more than a quarter million employees. At one time they, like the rest of the computer industry, went overboard allowing virtually all employees to decide what was secret. Eventually, even routine email was labeled 'confidential,' thus watering down their trade secret protection. If 30,000 people have access to 'confidential' information, is that information secret? Most likely, not.

Patent, or trade secret?

Often I'm asked, "If a patent would protect my ideas, then why bother making my ideas trade secrets?" The answer is if you believe you have a process, formula or recipe that no one else could figure out, then the last thing you want is a patent! The whole idea behind the patent system is if you invent something, you can exclude others from making, using or selling it. In exchange for patent protection, you have to disclose your idea to the whole world.

On the other hand, a disadvantage of trade secrets is anyone can independently come up with your secret on their own and there's nothing you can do about that. For example, if someone reinvents your formula for decaf cappuccino even by lawful means and makes it public, then it's not a secret anymore. Unlike with a U.S. Patent - over which you can sue someone for infringement if they come up with your idea - you can't prevent other parties from inventing what you originally protected as a trade secret.

Although you can't stop people from discovering what you maintain as secret, you can stop disclosures by those who've agreed to keep the information confidential, such as employees or vendors. Under the law, if someone leaves the company to work for someone else, that person cannot give away your trade secrets to another company. If that happens, you can sue that person *and* the other company.

Unlike the other forms of Intellectual Property (patents, trademarks, copyrights), there is no service or mechanism for setting up a trade secret, or applying for one. Neither your state government, nor the federal government, nor the U.S. Patent and Trademark Office provide methods for maintaining trade secrets.

Yet the trade secret might be just the Intellectual Property protection you need. The effort it takes to create and maintain a trade secret isn't all that difficult. Plus, the benefits of protection greatly outweigh any real or perceived disadvantage or hassle you might encounter.

Think of maintaining a trade secret as owning a precious gem. As long as you protect that little jewel, it's all yours.




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