What You Don't Know about Trade Secrets Could Hurt Your Business

​​​​Although you may not think that your business owns any "trade secrets," they are probably used every day. Businesses of every kind, large and small, have information that can be protected as a trade secret. Unfortunately, the failure to properly protect trade secret information may place your valuable business information in the hands of competitors.

Q: What is a trade secret?
A: A trade secret is something not generally known or readily discoverable by people outside your business that gives you an advantage over your competition. Although most people think of trade secrets as exotic formulas and processes, more common things may also be trade secrets, such as customer lists, marketing plans, sources of supply, assembly processes, dimensional tolerances for parts, data compilations and future product concepts.

Q: Are there any advantages in protecting something as a trade secret instead of with a patent?
A: Yes. In some circumstances, you can protect non-patentable concepts and information as trade secrets. In addition, while patent protection may last for a maximum of about 20 years, trade secret protection will last for as long as the information remains secret. It is also sometimes less costly to protect a trade secret than to acquire a patent.

Q: Are there any drawbacks in using trade secret protection?
A: The major drawback is that you must always be careful that the information remains secret. An accidental "public" disclosure may result in the loss of protection. Having adequate protection may require having your employees and contractors sign "confidentiality agreements." It also requires making sure that trade secret information is not publicly disclosed to third parties or posted in publicly accessible websites. It may  require keeping doors and files locked to prevent customers and delivery people from having access to the information. Adequate security for computer systems can also be important. Unfortunately, information that can be readily derived by "reverse engineering" (readily discovered by looking at a publicly available product and determining how it was created originally) cannot be protected as a trade secret. However, patent protection may be available to protect new and useful product features.

Q: Can I legally enforce the rights in my trade secrets?
A: The owner of a trade secret may obtain an injunction in court to prevent the wrongful use of his or her trade secret. Damages may also be awarded. It may also be a crime to steal someone else's trade secret, and criminal charges may be brought against the wrongdoer. Traditionally, trade secret protection has been provided by state laws. In 2016, a federal law was enacted that created a federal civil cause of action for the wrongful acquisition or use of another's trade secrets. The federal law also requires that certain provisions be included in employee and individual contractor agreements to obtain the full benefit of the federal law.

Q: How can I be sure that my trade secrets are protected?
A: The best way to make sure your trade secrets are protected is to have an "intellectual property audit." This usually involves working with an attorney who can identify your trade secrets and determine the steps that can be taken to achieve better protection. The audit may also uncover ways to better protect your other intellectual property. Once ways to improve trade secret protection have been identified, policies and practices can be implemented to reduce the risks that trade secrets will be lost. It is a good practice to have an audit conducted every few years to ensure that your trade secret protection continues as personnel and business practices change.

11/7/2016​

This "Law You Can Use" consumer legal information column was provided by the Ohio State Bar Association. It was prepared by Ralph E. Jocke, a patent and trademark attorney with a worldwide practice, and a principal with Walker & Jocke Co.​​, L.P.A., located in Medina, Ohio.

Articles appearing in this column are intended to provide broad, general information about the law. This article is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from a licensed attorney.

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