What are trade secrets? Studies show that trade secrets are often among the most valuable intellectual property. Yet they are frequently under-protected by businesses of all sizes and kinds. Special care must be taken to protect trade secrets. They are only protected through confidentiality — confidentiality that is all too frequently lost through inadvertence.
The most fundamental question to be asked in any enforcement case or for valuation purposes is “what is the trade secret.” Yet most clients struggle to answer this question with sufficient specificity, and many clients have misunderstandings about what can and cannot be considered a trade secret. Not having this answered properly ahead of time increases the likelihood of inadvertent loss, as well as the cost in an enforcement litigation. In sum, how can anyone protect what they don't know they have?
The place to start in identifying a business’s trade secrets is to understand just what are trade secrets. The legal definition is broad: trade secrets can be any information that is of value to a business and is kept confidential. Trade secrets are not only the “secret sauce,” such as the Coke formula, or other obvious ones like customer information, but include lots of other everyday things that occur in or are part of a business. And, contrary to popular belief, most businesses have trade secrets of some kind or another.
Common examples of trade secrets include:
- the process for making a product or providing a service,
- inventions that are not protected (or protectable) by patent,
- the identity of suppliers and vendors,
- information learned in R&D efforts (including what worked and what did not, and why it worked and it didn’t)
- sales and marketing strategies, and
- business plans.
Unlike patents, trade secrets do not need to be new or novel and can even be capable of reverse-engineering (with enough time and effort). Often, businesses over look trade secrets and do not realize they are important until they are lost.
What are “Reasonable Measures” to Preserve Trade Secrets? When it comes to trade secret protection, the law demands a business take “reasonable measures” to protect them. A multi-prong approach is required. While absolute secrecy is not required, constant, yet unobtrusive, vigilance is necessary to ensure that “reasonable measures” are taken to protect the confidentiality of the trade secrets. Confidentiality agreements and cybersecurity protections are essential, but they are one part of what is required for the effective protection of trade secrets. Threat assessment and management is advisable.
Special attention must be paid when trade secrets are shared outside the company, with business partners and others in the supply chain (including customers and vendors). In the event of enforcement, businesses will need to be able to answer what was shared with others and when it was shared, an exercise that, for most businesses, will require a lengthy and expensive investigation, as this information is rarely tracked in a systematized and comprehensive way and few tools are readily available to help businesses in this effort.
Our “Best Practices” Approach Our litigation experience in helping companies enforce their trade secrets, as well as our work on several national “best practices” efforts related to trade secret protection, gives our firm the knowledge necessary to assess the effectiveness of a company’s trade secret protection measures and the knowledge and tools required to assist companies in improving and enhancing these measures, especially around trade secret identification and categorization and, where appropriate, developing and implementing the systems and processes necessary to track and document trade secret sharing, among other things.
In addition, we also assist companies in training their employees, contractors, and other business partners to properly protect trade secrets and help businesses create a culture conducive to trade secret protection. Where appropriate, we assist companies in conducting due diligence on potential business partners with regard to their trade secrets practices. We also collaborate with cybersecurity and data privacy professionals as needed to ensure the trade secret protection program is as comprehensive as necessary.
Improvements in all of these areas will both reduce the risk of loss, as well as the cost of investigation and enforcement should loss occur.
In most cases, we offer these trade secrets services on a flat fee basis that is tailored to, among other things, the size of the business and the number of trade secrets to be protected.