If you are a start-up founder or business owner, you may wonder whether the special practices or proprietary information that make your business unique qualify as trade secrets under state or federal law. In this blog, we’ll provide five questions to ask, to determine if you have a protectable trade secret.
What is a Trade Secret?
Trade secrets are one of your company’s most valuable assets. When determining if your company qualifies for “trade secret” protection under state or federal law, you must understand what defines a “trade secret.”
The term “trade secret” refers to a formula, pattern, compilation, program, device, method, technique, or process that is held closely within your company. This confidential and proprietary information provides your company with a competitive edge over competitors.
Does My Proprietary Information Qualify as Trade Secrets?
The public has more than a passing awareness of several well-established trade secrets. For example, in the beverage industry, Coca-Cola has a “secret formula” for its soda. Arguably, one of the most valuable trade secrets on the internet community is Google’s search algorithm. The commonality between these is that the companies that own them rely on them to have a competitive edge against their competition.
A few examples of other types of trade secrets include:
- Manufacturing methods
- Software programs
- Customer lists
Do I Have Undisclosed Information?
To receive federal protection under U.S. Intellectual Property law, a company must take proactive steps to keep trade secret information confidential and away from prying eyes outside the company. It must contain proprietary information and must exhibit an economic value. So, whether it’s a secret recipe, a secret ingredient in a manufacturing formula, or a proprietary database, the proprietary information that enhances the company’s value must remain private and restricted from outside access.
Every company should determine whether it has trade secrets and, if so, institute protections to safeguard its information. If the company fails to protect the proprietary information, then such information loses its protected status. There are several ways to protect against disclosure:
- Physical security, such as a vault, or restricting access to specific individuals
- Digital security
- Network security
- Non-compete/Non-solicitation agreements
- Non-disclosure/Confidentiality agreements
Are There Remedies for Theft/Misappropriation?
Absolutely. Companies and individuals have remedies available to them on both the state and federal levels.
In 1979, the Uniform Law Commission created the Uniform Trade Secrets Act (UTSA), which standardized the definition of trade secrets across state and regional jurisdictions. Approximately 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have adopted the UTSA. The only outliers are New York and North Carolina.
In 2016, the U.S. Congress passed the Defend Trade Secrets Act to standardize national and international enforcement of trade secret protections. This federal law does not preempt state laws but gives additional access to the federal courts as an extra tool in a business’s arsenal against IP theft. It also added criminal penalties for some types of misappropriation.
Another type of remedy available is referred to as injunctive relief, which is essentially a request to a court to prevent someone from doing something. For example, one scenario would be where a former employee goes to work for a competitor and brings proprietary company information to that competitor.
Is Protection Limited to a Number of Years?
Assuming you meet the criteria for protection, trade secret protection is ongoing. There is no application process like those for patents, copyrights, and trademarks. Best of all, perhaps, is the (potentially) unlimited duration of protection. Other forms of intellectual property, including patents and copyrights, have limited durations. A trademark could hypothetically have perpetual duration if it is properly maintained.
If you’re interested in learning more, please contact us today to schedule a consultation.