Confidential business information is the most valuable asset for most businesses. Safeguarding it is a lot more complicated than locking the door when you leave.
Confidential information is being used every day in your business. Hence, it’s a real challenge to protect it.
For example, in the restaurant business, recipes and ways of preparing certain dishes are what distinguish a restaurant. Employees need access to the recipes to prepare the food. If an employee leaves and takes the recipes and “secret sauces” with them to a competitor, the business could be seriously harmed.
For technical companies, formulas or technical specifications are critical information. Employees and suppliers need access to the information to perform their jobs and develop further enhancements. The business can be seriously harmed if an employee discloses the formulas or technical specs to a competitor or uses it to start a competing company.
The safest way to protect your information is to keep it “secret.” A trade secret can be any formula, pattern, device, machine, process, technique, compilation of information, or program. A trade secret remains good only long as it is not disclosed.
For example, extraordinary steps are taken to safeguard the formula for Coca-Cola. It is said to be kept locked in a bank vault. The bank vault can be opened only by vote of the Coca-Cola Company’s board of directors. Only two Coca-Cola employees ever know the formula at the same time. The employees’ identities are kept secret and they are not allowed to fly on the same airplane.
Legal Protections – Written Agreements
It’s wise to have confidentiality agreements with all employees and to carefully articulate responsibilities for “Trade Secrets” and Confidential Information.
It’s also important to establish that the company owns the rights to inventions or enhancements created by employees or contractors. This can be accomplished in an agreement assigning rights to the employer. You’ll need “work for hire” agreements with contractors.
Business Practices – Practical Steps
While it may not be possible to keep your information secret, there are practical steps that you can take to protect trade secret and confidential information:
– Limit access to only those with a real need to know in order to do their job;
– Before allowing access, require a signed confidentiality and non-disclosure agreement; and
– Take steps to secure the information (e.g., mark it, log who accesses it, lock it up).
In conclusion, while there are legal remedies for theft or unauthorized disclosure of confidential information, it is costly and disruptive to pursue litigation. It’s much better to take steps to protect your business information by limiting access and clearly establishing that you intend to protect your rights. Good business practices and appropriate agreements can go a long way to protecting your business information and your competitive advantage.