7 steps to protect your trade secrets

On Behalf of | Jan 31, 2018 | Blog |

It could be a scene from almost any of the Mission Impossible movies. The man–wearing all black, of course–plummets down the air shaft until his harness stops him mere inches from the floor. In a flash, he’s typing away on a nearby computer terminal. After a tense moment, the man announces into his headset, “I’m in.”

And just like that, he has your trade secrets. But is that really how it happens? Of course not–that’s the movies. In real life, it’s much more likely that your own employee will be the one stealing your trade secrets. For instance, just before your programmer gives his notice, he emails the source code for your company’s new software to his home account.

It’s who you know

State and federal studies show that most intellectual property (IP) misappropriations will come from someone you know. One state study found that over 90 percent of the thefts were committed by someone the business owner knew. 67 percent of employees who took confidential company information did so to help them get or perform at a new job.

How to protect your trade secrets

Protecting your trade secrets is protecting your business, and to do it properly, you will need to involve your entire staff. Studies show that the majority of IP thieves had signed an IP agreement–which indicates that prevention efforts require multiple steps. You can’t just rely on the IP agreement to do the job. Here are seven steps that can help protect your trade secrets:

  1. Identify your trade secrets: Any confidential business information which provides an enterprise a competitive edge may be considered a trade secret. Examples include source code, customer lists, supplier lists, pricing and margins, formulas, processes and other methods of operation. If this information would help your competition, then it most likely should be classified as a trade secret.
  2. Keep the secret: If the secret is kept digitally, it should be on a secure server with limited access. If the secret is on paper (think of the Coca-Cola formula locked in a vault somewhere), mark it as “CONFIDENTIAL” and keep in a locked file.
  3. Compartmentalize: The more people that have access, the more opportunity there is for theft. Only the right people should have access.
  4. Educate and train staff: Make employees aware of the importance of your company’s trade secrets. Discuss the warning signs of IP theft and how to report suspicious behavior. Make this a part of your employee onboarding process and have new employees sign an intellectual property agreement. Use periodic reminders and follow-up training to keep the issue current with your employees. Make use of this training as an opportunity to have staff re-sign IP agreements.
  5. Hire properly: Be thorough in checking backgrounds of potential new hires. If a recruit offers to bring competitive intelligence from their former employer–what you would consider a trade secret–walk away. If they would do that to their former employer, be confident that they will do it to you as well. There is also legal risk for your business if competitor trade secrets come to your company.
  6. Understand legal protections: Unlike other types of intellectual property, such as patents, copyrights and trademarks, the law does not provide for registration to obtain legal protections for trade secrets. California has trade secret laws adopted from the Uniform Trade Secrets Act, which provides trade secret owners a procedure to file civil lawsuits in federal court.
  7. Prosecute violators: If you suspect your intellectual property is being used or you have uncovered the theft of your trade secrets, act quickly. A cease and desist letter is often the first step, but consulting with an experienced intellectual property attorney will help determine the most prudent course of action.

Consider working with an experienced intellectual property attorney before problems arise. Your attorney should be able to guide you through the steps to take for maximizing your trade secret protection and helping you to keep your competitive edge.