Posted on April 16th, 2020
What’s in the secret sauce?
How do they make that fabric so soft?
What’s the key to this being so fast?
Customers aren’t the only ones asking these questions. Sometimes, other businesses want to know the secret to another company’s success.
If you own a business, chances are you have a trade secret. You have something you owe your business success to and you don’t want others in on it.
Trade secrets are intangible assets and there are laws to protect them. Read on to learn more about how to protect trade secrets.
The Uniform Trade Secrets Act
The Uniform Trade Secrets Act helps define trade secrets. Information is considered part of a trade secret if it is:
- not known outside of the business
- known only by those inside the company business
- subject to reasonable measures to keep it secret
- valuable
- difficult for others to get or duplicate
The law itself protects almost any business information that would give a competitive edge. That business needs to take its own precautions to help keep their trade secrets a secret.
Trade Secrets in California
California law states that a trade secret is any information that has value from the public not knowing about it. This could be anything like:
- a formula
- program
- device
- method
- process
- pattern
- technique
To help protect your business’s trade secrets, ask yourself the following questions:
1. What Needs Protection?
As a business owner, you need to decide what information needs protection. You also need to have some kind of system in place to identify what will be a trade secret in the future.
2. Do All Secure Documents have Proper Labels?
Any documents that have trade secret information should have a “confidential” label. Make sure you have limited copies of these documents and number them so you can keep track. You might also want to consider a system for checking the documents in and out.
3. Where Is Secret Information Stored?
Carry out an information audit to find where all your vital information is and who has access. This includes hard copies and digital. Are there any weak spots that need to be addressed?
4. Are Your Computers Secure?
Chances are, you have trade secret information on your computers. To limit access, make sure anything with sensitive digital information requires a password.
5. Do You Have Security With Your Outside Vendors?
If you work with outside vendors, make sure your contracts include a confidentiality provision. Make the wording strict so vendors know what is sensitive information.
Also, you may want to hire out different vendors for different aspects. When you do this, make sure the vendors don’t know of the final product or how their piece fits in.
This way, vendors don’t have all the vital information to leak.
6. Do You Have Adequate On-Site Security?
If your business is small, a single lock on a cabinet might be sufficient. A larger company will need more.
Consider security officers, secure zones, badges, and IT security.
7. Does the Public Have Access?
You might want to limit public tours or what is shown on them. There should also be documented on anyone who visits your business location.
8. Are You Internationally Cautious?
Every country has its own set of laws and regulations to abide. Understand that not all countries will value the protection of trade secrets from the United States.
If your business requires international relationships, be very careful with sharing information.
9. Do Your Employees Know How to Protect Trade Secrets?
Some of your employees will work with information on your trade secrets. Make sure they take all required training and sign a non-disclosure agreement.
They should also sign a copy of your company policies regarding the proper handling of information.
Educate your employees on disciplinary actions if they mishandle trade secret information. When employees leave the company, hold an exit audit.
During the audit, make sure they return any materials related to your trade secrets. Don’t forget to remind them about the non-disclosure agreement they signed.
This is one of the many services the right business lawyer should be able to provide you with.
Misappropriation In California
Misappropriation is when trade secret information gets into the hands of an “outsider.” There are two main types of misappropriation in California:
- Obtaining the trade secret by improper means
- The use or disclosure of a trade secret without consent:
There are several instances that can fall into the second category:
- Theft of the trade secret through improper means
- Knowledge of a trade secret through mistake or accident
- Gaining trade secret knowledge by another person who made the theft
Penalties for Misappropriation
Under California law, you can prevent misappropriation by a court-ordered injunction. You can call for an injunction even when misappropriation is threatened.
If your business is a victim of trade secret theft, you can also seek financial compensation.
This would be the amount of actual loss associated with the theft. It also includes any profit the theft received by acquiring the trade secret.
Cal. Labor Code Sec. 2860
California law states that the employer owns any trade secrets an employee creates.
Protecting Your Trade Secrets
The secret to your business’s success needs to be kept secret. This is oftentimes easier said than done. A rival company may steal vital information or an ex-employee may want to leak information.
Make sure you take measures to protect your sensitive information. Keep track of any hard copy documents in locked and secure places. Establish an IT security team to keep your digital copies safe.
Keep in mind, your company involves all your employees, too. Make sure they know how to protect trade secrets. Otherwise, Great-Grandma Zelda’s secret sauce may not be so secret anymore.
If you want to ensure your trade secrets are protected, contact us today to learn more about how we can help.
