In our competitive markets, businesses often attribute actual or future commercial success to important information or processes unknown to competitors: trade secrets. California statute defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process” with “independent economic value” precisely because it is unknown outside the business due to reasonable efforts to keep it secret.
Trade secret subjects may encompass recipes, customer lists, product specs, pricing policies and others.
At our law firm, we represent people in a wide variety of trade secret matters, including individuals and businesses seeking to protect their commercial trade secrets. There are several ways to proactively reduce the risk that others will misappropriate, steal or otherwise improperly use trade secrets.
The American Bar Association or ABA attributes the rising vulnerability of trade secrets to employee and executive mobility between companies, combined with the “digitalization of company assets.”
Broadly, depending on the type of trade secret, the nature of protective measures can include:
- Physical: Keep them hidden and secure; mark them secret
- Restricted access: Only allow certain employees to know of them
- Contractual: Draft protective agreements to require secrecy from employees and others
Confidentiality or nondisclosure agreements are important tools in the trade secret protection toolbox. For example, NDAs may be appropriate as a condition of doing business with independent contractors or others like service companies, vendors, suppliers and more. Basically, to do business with us, you need to sign this contract that you will keep confidential any of our trade secrets you learn about during your relationship with us.
Because the most common parties who engage in trade secret disclosure are current and former employees, the ABA emphasizes the importance of trade-secret protection at two key times: the beginning and the end of the employment relationship. For example, when an employee comes aboard, in addition to requiring a comprehensive NDA, the employer should clearly communicate policies regarding trade-secret security as well as expectations that the new employee keep trade secrets of his or her former employers confidential.
We will continue this discussion of trade-secret protective measures in future posts.