Protecting your company's trade secrets is important for two reasons:
- You'll make it less likely that confidential information will be misappropriated.
- It will be easier for you to seek relief in court if your secrets are stolen.
In one form or another, 40 states and the District of Columbia have adopted the Uniform Trade Secrets Act. Almost any secret information that gives a business a competitive edge can be protected under this broad law. That includes manufacturing processes; the formula for manufacturing a product; software; customer lists and information; general corporate strategy; business plans; and marketing techniques.
The information must be secret and must be "the subject of efforts that are reasonable under the circumstances to maintain its secrecy."
Although the law explicitly indicates that not every employee and every person must receive express notice of the trade secret status of every piece of information, an impossible standard, this is the goal to which you should strive.
Here are 17 ways to protect your trade secrets:
1. Specifically identify each piece of information you wish to protect as a trade secret. Establish an ongoing system to identify new trade secrets.
2. Do not be overly inclusive or overly broad in choosing which information to protect, as this will trivialize and undermine protection of your true trade secrets.
3. Label all documents that contain or reflect trade secret information as CONFIDENTIAL and treat them as such. Limit copies and, where appropriate, register document numbers and require the return of such information either when the task is completed or on demand.
4. Limit access to the information to those employees who need to know.
5. Instruct all employees who work with company information as to which information is considered a trade secret and how they should treat it.
6. Have all employees who will be exposed to, or use, the information sign confidentiality agreements and, if appropriate, covenants not to compete.
7. Implement security measures such as secure zones, badges, guards, passwords and locked cabinets. Limit access to your facilities through tours or other public disclosures. Make visitors sign in and out, wear badges and, if appropriate, sign confidentiality agreements. (Examples: any consultant, prospective purchaser or joint venturer.) Prohibit cameras, tape recorders and similar items. Monitor computer notebooks.
8. Be very careful about information on computer disks or hard drives. Make sure the information is available only through use of a password that is given only to appropriate personnel and is changed frequently. Remember, electronic mail may last forever and be redistributed, and there is no security on the Internet.
9. Include a confidentiality provision in all contracts with outside entities, including temporary workers, distributors, joint venture partners, licensees, vendors, customers, etc.
10. Be very careful that information you are trying to protect is not unwittingly disclosed in advertising or marketing. Be careful, too, about training materials, professional publications and presentations at trade shows or conferences.
11. Conduct periodic trade secret audits to check for leaks.
12. If you outsource any of your product/technology assembly, require strict vendor confidentiality agreements, use different vendors for different components and do not disclose either how the parts relate or any final product information.
13. Be aware that, outside the United States, trade secret protection varies widely, from some to none.
14. Establish and update written policies and manuals for protecting your intellectual property, including trade secrets. Require your employees to read, understand and comply with these policies.
15. Hold periodic training sessions to remind employees of these rules and
to note and correct sloppy practice.
16. Correct, censure, reprimand and/or discipline employees violating these policies.
17. Hold exit audits with departing employees in which you obtain the return of all secret information and an acknowledgment from the employee of compliance with noncompete, nondisclosure or other obligations. Note: You can base certain severance payments or benefits on the condition of continued compliance.
V. John Ella is an associate and Seymour J. Mansfield is co-founder of Mansfield, Tanick and Cohen, P.A., based in Minneapolis. For more information, visit www.mansfieldtanick.com.
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