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Trade Secrets - Safeguarding the "Crown
Jewels" of Your Business
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. "Trade Secrets" 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. Practical Safeguards 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). Inventions and enhancements It's 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. Non-solicitation agreements Non-solicitation agreements protect your business by precluding former employees or contractors from soliciting customers or other employees for a period of time (e.g. one year) following termination of employment. "New" versus "Current" Employees There is an important difference in the agreements for new employees and agreements for current employees. For these agreements to be legally effective, there must be what's called "consideration." For new employees, hiring is consideration. For current employees, you must give them something of value (e.g., $10). If an employee is promoted, you may need to have him/her sign a new agreement, to maintain the legal effectiveness. 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. Jean D. Sifleet P.S. My office provides assistance with business practices, confidentiality and non-disclosure agreements as well as employee agreements. If you'd like to discuss steps to protect your confidential information, please give me a call. eNews
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