October 12, 2016
Originally posted 2018-11-19 11:19:28
Originally posted 2014-09-10 11:00:19.
By Eliana Rocchi | amdlawgroup.com
What do the Twinkies, WD-40, Coca-Cola and the Google’s search algorithm have in common? They all embody well protected trade secrets.
A Trade Secret consists of ideas, formulas, processes, pattern, compilations of information, physical devices or, more generally, confidential proprietary information that grant their owners a competitive advantage in the market or an actual or potential economic benefit. They are the extremely valuable information that constitutes the lifeblood of a business and therefore needs to be carefully protected from being acquired by competitors.
Unlike patents or other forms of intellectual property, trade secrets cannot gain federal protection by registration. They need to be protected in the first place by their owners, who ought to keep that information confidential as even a small trade secret security breach could undermine a company’s competitiveness. The impossibility of obtaining a registration, though, does not mean that Trade Secrets do not enjoy protection. They are protected under the Economic Espionage Act (EEA) at the federal level, and by many State Statutes based upon the Uniform Trade Secrets Act (UTSA).
In order to be classified as Trade Secret and to consequently gain protection as such, the information has to meet some requirements that are specific of each state. There are some criteria, though, that are generally contemplated:
1. First of all it needs to fall in the categories of information that are eligible for trade secret protection. Even though there is not a straight definition of such information, potential Trade Secrets could be: recipes, formulas for drinks, not patented inventions, manufacturing techniques, processes or procedures, prototypes, codes, survey methods used by professional poll companies, marketing strategies, marketing information and plans, computer algorithms, even “negative know-how”.
2. The information, then, needs to actually be secret, in other words it must be not be generally known or readily ascertainable to the public or easily available to competitors unless obtained by illegal means.
3. The business must gain independent economic value from the information and must take reasonable measures to maintain its confidentiality.
If your company owns information that can fit in these criteria, then, you might want to make sure that you adequately protect it in order to secure your trade secret. Of course you will vigilantly control how the information is handled and to whom it is disclosed, but what other measures can you employ?
You can require anyone that comes in contact with the secret information to sign a confidentiality agreement. It is particularly important that employees, contractors and other individual that may have a long lasting business relationship with your company, periodically sign such agreements. You can have a form prepared by a lawyer for such purpose.
If you had your information written down you can apply a “confidential” label or stamp on the front cover and on each page of the document in which it is contained. You can also add a disclaimer informing that the information contained in the document is confidential and protected by the law, in particular by the Economic Espionage Act of 1996 (18 U.S.C. Sec. 1831), which provides criminal penalties up to 15 years of imprisonment and/or a fine up to $5 million for stealing or otherwise appropriating, copying or otherwise duplicating, receiving, possessing or obtaining any trade secret (higher penalties are provided for organization).