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Got trade secrets? Protecting them must be a high business priority

Potential threats to your trade secrets can come not only from outside the business, but also from within.

Money, time, effort, resources, creativity – all these assets go into creating a successful business. But many commercial entities also rely on trade secrets for their prosperity and protecting confidential information can be essential to ongoing profitability.

Almost all states have passed the Uniform Trade Secrets Act, known as the UTSA, in some form, including Oregon and Washington. The Uniform Law Commission is a group of legal experts who draft uniform laws for state legislatures to consider for adoption. State-adopted UTSA statutes along with common law, which is the law judges create in their written opinions, provide protections for trade secrets.

In addition, Congress enacted and President Obama signed the federal Defend Trade Secrets Act or DTSA in 2016, giving trade secret owners the right to sue for misappropriation of their secrets in federal court so long as the trade secret is “related to a product or service used in … interstate or foreign commerce.”

Nature of trade secrets

So, what is a trade secret? It can encompass a wide variety of valuable, proprietary, confidential business information that is integral to a company. The precise definition varies a bit from jurisdiction to jurisdiction, but generally it is intellectual property neither known to competitors nor easy for them to legally discover. It has economic value to the owner, usually evidenced by financial investment into the secret and potentially resulting in company profits. The business must also take reasonable steps to protect it.

Probably the most commonly discussed trade secret example is the formula for Coca-Cola.

Common examples of trade secrets may include, depending on the company and applicable law:

  • Formulas
  • Designs
  • Computer programs or codes
  • Plans, models and prototypes
  • Techniques, processes and methods, including training manuals
  • Customer lists
  • Machines and equipment

Protective strategies for trade secrets

Citing federal court data, WIPO Magazine reported in 2016 that over 85% of trade secret misappropriation suits are against employees and business partners, so internal company security is crucial.

What are some common ways to protect trade secrets? An experienced attorney can help develop a written comprehensive trade secret protection plan and ongoing trade secret audit program that set out reasonable security measures, including:

  • Contracts and agreements: The business may require employees, contractors, business partners, vendors and service providers to sign nondisclosure or confidentiality agreements.
  • Language of secrecy: A business should label trade secrets as confidential for emphasis. This might involve signs in manufacturing or research areas, notations on physical files and reports, and notices within computers or internet files.
  • E-protections: Use firewalls and passwords to prevent electronic access to trade secrets. Make it clear that employees and others with access to trade secret information may not move it to personal email accounts and devices.
  • Physical secrecy: If appropriate, lock up secret machines, equipment or products with controlled access. Post security guards to prevent entry to certain areas of the physical plant. Tightly control visitor access to work areas in which they could be exposed to secrets.
  • Limit access: A rule of thumb is to only reveal trade secrets to as few employees as necessary.
  • Formal intellectual property protection: A lawyer may recommend patenting some qualified intellectual property.
  • Employee training: Provide detailed trade secret training that clearly sets out expectations for employees initially and ongoing. Require familiarity with written policies and plans, and mandate frequent review. When an employee leaves the business, emphasize their legal obligation to keep trade secrets confidential. Require that they leave behind all equipment and documentation used or acquired in their job and that they take with them no electronic copies.

This is a basic introduction to a complex area of business law. An attorney can answer questions about a particular business owner’s trade secret concerns and help develop robust plans to prevent misappropriation.

The lawyers at Slinde Nelson in Portland, Oregon, assist business clients in the Portland and Vancouver, Washington, region as well as in the Seattle metropolitan area with trade secret protection.

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