In All
Potential Sources of Trade Secrets: A trade secret may consist of any information that the company feels is valuable enough to justify taking some measures to protect.  For example, the following may constitute trade secrets, the cost of materials, profit margins, financial plans, banking relationships, the names of investors, marketing strategies, business relationships, budgets, management information systems, information about clients/customers, including their identity, and the names of key contacts at those customers.

If you are considering the protection of your company’s trade secrets, it is suggested that you prepare a list, which list itself is a trade secret. After the list is prepared, the company should take protective steps to safeguard the information.

 Protection of Trade Secrets:  Company information that it is clearly visible and accessible to anyone and everyone will typically not constitute as a trade secret.  Some physical security measures should be implemented to limit the access to the information.  Such protective measures may be as simple as locked file cabinets, computer file passwords, locked offices, etc.  The goal is to limit access to the information to those employees or business relationships who have a need to know to carry out their job or contract responsibilities.

Paper Files: If the trade secret is a paper document, it is suggested that it be stamped or that you prepare a colored cover sheet with a designation of trade secret, or take similar steps to designate the information as a trade secret.

Individuals Responsible:  Who is the employee responsible for safeguarding the trade secret? This obvious question often goes unanswered—and that is a mistake. The person should be someone with reasonable authority—not the file clerk.

Hide the Details:  It is important to take steps to disperse or hide the details of the information so that as few people as possible have access to it, those who need to know to carrier out their respective obligations for the company.  

 Divide Procedures:  Another technique to protect trade secrets is dividing up processes or procedures among various groups so that no single person knows everything that could be damaging in the event an employee leaves the company.

 Trash Disposal: Procedures for the disposal of confidential data should be a part of the process. It might be helpful to look into the company policies and practices on document destruction.

 Visitors and Tours:  Showing a visitor your company’s process and procedures that you consider trade secrets can cause you to lose the trade secret protection.  A trade secret evaluation or audit might inquire as to the company policies and practices regarding outside visitors.

 Phone Calls:  Be careful who is listening while on the telephone or the cell phone. There have been highly publicized cases of people overhearing sensitive information from phone calls.

 E-mail:  E-mail is another potential problem. In some systems, e-mail is very difficult to remove and may end up being stored permanently. Its security may also be questionable. Restricting transmission of sensitive information via e-mail may be appropriate.

Computer and Software Access: The distribution of computer network throughout the organization creates significant problems.  Restrictions may be required regarding laptop computer usage. Certainly those who travel should not be allowed to have a laptop computer with sensitive information on it. Laptops are high on the list of stolen items.  Additionally, passwords, techniques to prevent unauthorized use or access to certain programs or certain computers may be warranted.

Employees:  It is frequently said that employees are the biggest problem in terms of loss of trade secrets. This often occurs when an employee changes jobs or competes with its former employer.  Procedural safeguards to prevent employee misappropriation of trade secrets should be implemented to preserve and enforce trade secret protection. For example, (1) prepare a company manual or policy informing employees how important the trade secret information is to the company; (2) Have all employees sign appropriate nondisclosure and/or non-compete/non-solicit agreements if warranted; (3) If the employee leaves, it is suggested that an exit interview be conducted where the nondisclosure requirements are reinforced, and the employee is specifically demanded to return specific documents/files/records.

Contractual Relationships/Licensing Agreements: Contractual relationships with those who may have a need to access your company’s trade secrets may require non-disclosure agreements and/or non-compete agreements as well.  It may be the case that each individual, not just the contracting parties, who have access to trade secrets to perform under the contract, must sign a confidentiality agreement that they have returned all company documents and have not made any copies.

The above is intended to be fairly generic. Your company should tailor its trade secret protection efforts to the particulars of its business.  If your company was selling certain of its assets, what trade secret information would you want to bring to the attention of the prospective buyer to bring more value to the table and what would you do to protect the trade secrets.  

Sandstrum Law can assist you in implementing a trade secret protection process and safeguard your valuable edge in the marketplace.  Contact Sandstrum Law for more information.  The above is not legal advice.  The reader should contact an attorney to obtain the best course of direction for its company relative how best to protect/preserve its trade secrets.  Sandstrum Law is required to provide this disclaimer – be responsible. S/L Ascend to your Goals>>