What's
the most valuable trade secret in the world? If your answer is "the
formula for Coca-Cola," most experts would say you're right.
It's
amazing but true. The incredibly valuable formula for Coca-Cola isn't
protected by a patent, a trademark--although the names "Coca-Cola"
and "Coke" are both registered trademarks--or a copyright.
The
formula for Coca-Cola is, and always has been, just a lowly trade secret.
A
trade secret is basically any information that's unique and valuable to your
business but isn't known to people outside of your business. Trade secrets
can be protected under state and federal law. However, in order to be
classified and legally protected as trade secrets, there are five key rules
that a business must generally follow regarding the information.
Trade
Secret Rule #1: Trade secrets must really be secrets. In other words, a
trade secret must be any type of information used in your business that's
not generally known to the public and would not be ordinarily available to
your competitors except by the use of improper or illegal means.
So
watch very carefully what type of information your business voluntarily
provides to any outsider or third party. Any information that you
voluntarily (a) give out to potential customers, (b) post on your website,
(c) provide to trade associations or (d) provide to others outside your
company cannot be protected as a trade secret unless the recipient
signs an appropriate confidentiality agreement.
Trade
Secret Rule #2: Use a warning label. In many cases, you must use a
written label or sticker to classify and protect your designated trade
secrets. You can simply use a "Confidential" rubber stamp on each
page of any trade secret information or put the word
"Confidential" in the header or footer of each page of any
documents you consider to be trade secrets.
If
you want to provide a more "legal sounding" warning, you could
consider placing a label on the front cover of any trade secret document
that contains the following warning:
This
item/document/material contains CONFIDENTIAL TRADE SECRET INFORMATION owned
by [THE LEGAL NAME OF YOUR COMPANY] and/or its affiliated companies. This
information is protected by applicable state law and may be protected by the
federal Economic Espionage Act OF 1996 (18 U.S.C. Sec. 1831), which provides
for criminal penalties of up to 15 years in prison and/or a $5 million fine
for stealing, receiving, possessing and/or duplicating any information
contained herein.
Trade
Secret Rule #3: Restrict physical or electronic access to your trade secret
information. It's very important that you also limit access to trade
secret materials on a need-to-know basis. A locked filing cabinet with
limited key access is sufficient. You could create secure passwords for
computer-stored trade secret information. In addition, you should consider
shredding (rather than throwing away) any documents containing trade secret
materials and you should also be obliterating or wiping (rather than merely
deleting) any trade secret information contained on a computer hard drive or
other electronic storage medium.
Trade
Secret Rule #4: Continue to require that everyone sign confidentiality
agreements. As already mentioned above, if you voluntarily give any
trade secret information to someone outside your company, you must have the
recipient sign an appropriate confidentiality agreement. In addition, you
should get in the habit of having all employees, consultants, independent
contractors and potential business partners routinely sign confidentially
agreements if they may receive or have access to any of your company's trade
secrets.
Trade
Secret Rule #5: Follow all the rules outlined above. Now that you've
come this far, it would be a shame to lose protection for your trade secrets
by not practicing what you preach. Having a trade secret policy without
actually enforcing it on a daily basis will have a negative impact on your
company's ability to protect its trade secrets in court.
These
are the general rules that every business can use to protect its valuable
trade secrets. Just remember that the law governing trade secrets may vary
somewhat from state to state, so it's important to check with your legal
counsel to be sure of the specific requirements in your state.
