JUNE / JULY 2004
Back to Newsletter
Protecting Your Trade Secrets
by William S. Wyler
Schwartz, Manes & Ruby
Trade secret protection requires several steps, all of which must be reviewed and maintained on a regular basis. Trade secret is a statutory creation in every state. In order to have a protractible trade secret, the statutes must be followed. Failure to follow the statutes at any step will destroy the trade secret protection of the information.
Identify the information which is considered to be a trade secret. Failure to identify trade secrets is a common stumbling block to proving a trade secret in court. There is no way that someone can be expected to maintain information as a trade secret when the information has never been identified as a trade secret. Identifying the trade secrets in a written notice that is signed by those expected to keep the secret, such as a non-disclosure agreement, is best because it can later be proven in court.
Don't try to identify everything as a trade secret. Often non-disclosure and confidentiality agreements try to cover everything with general language (i.e. "All information provided by ABC, Co. is considered proprietary, confidential and a trade secret."). The more general and sweeping the identification of the trade secret information, the more likely a court is to find that the identification is insufficient or over broad. In that case, the court is likely to find that there was no trade secret. Writing a confidentiality agreement, in which the scope of the information to be protected is broad but still enforceable, can be very tricky. It should be done by someone familiar with trade secret law.
Not all information will qualify as a trade secret. Not all information can be protected as a trade secret. Some information, even if all the proper steps are taken, simply will not be considered a trade secret. Most commonly, this involves information which is already in the public domain (available to the public). A client list made up of all the hospitals in an area will not be a trade secret. Anyone can obtain that information from telephone books or a dozen other sources. However, a client list made up of all the hospitals, with the names and birthdays of the purchasing agent and the inventory selection most requested by the purchasing deapartment, could be a trade secret.
Protect the information identified as trade secrets. It is not uncommon for companies to require confidentiality or non-disclosure agreements be signed at the outset of employment or at the beginning of a project and then do nothing further to protect the information. It is not enough to have a non-disclosure agreement! The information must then actually be treated as if it were a secret. It can not be made available to anyone, taken home by employees at will, shared with customers or clients, used in promotions or left out on desks overnight. The law requires reasonable efforts to protect the secrecy of the information. Absent those efforts, courts will not find that there is a trade secret.
There are other issues involved in whether information is a trade secret. However, those issues are more legal than factual. They are not effected by the manner in which the information is treated. The most complex legal issue, in those states that have adopted a version of the Uniform Trade Secrets Act (including Ohio, Michigan, Kentucky and Indiana) is that the information claimed as a trade secret must have "independent economic value." Unfortunately, this term is not defined by the statute and its meaning has never been truly addressed by the courts. For that issue, counsel familiar with trade secret law should be consulted, to help establish the required independent economic value.
Back to Top of Page
Back to Newsletter
|
