A few weeks ago, an Ohio federal jury found that Goodyear Tire stole a European inventor’s ideas related to tires that can self-inflate, and awarded the inventor $61.2 million in punitive damages and $2.8 million compensatory damages for Goodyear’s theft of the inventor’s trade secrets.
Trade secret is probably the least known form of intellectual property to the public. Yet, among all forms of intellectual property, including patents, trademarks, and copyrights, trade secret generally covers the widest spectrum of subject matters as long as it is kept confidential and the owner of it derives economic benefits from using it. The statute governing the federal laws of misappropriation of trade secrets, the Defend Trade Secrets Act (“DTSA”), defines the trade secret as “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.”
While trade secret allows a broad range of things to be protected under both state and federal trade secret laws, such protection disappears when the things become publicly available or are otherwise disclosed. Thus, it is imperative that business owners maintain the secrecy of the information. Here are some steps that one may take to protect your business information as trade secrets.
1. Identify Trade Secrets
As noted in the DTSA, trade secrets must derive independent economic value from not being generally known. That is, a piece of information has to bring one some form of economic or business advantage or confers benefit upon it by remaining confidential. Some common examples of trade secrets include, but are not limited to, recipes, algorithms, customer lists, supplier lists, and advertising strategies. The Coca-Cola formula is a famous example of a trade secret.
2. Document Trade Secrets
Trade secrets that are identified must be documented. That is, one needs to put in writing their secret status and business value. That also means adding a notice of confidentiality page to or marking as confidential the subject trade secret documents or objects.
3. Treat Trade Secrets As Confidential
Whenever one hires a new employee, it needs to ensure his or her employment agreement contains a provision that sets forth his or her duties to not disclose and to treat the company’s trade secrets as confidential at all times during and after his or her employment. If the company possesses an exhaustive list of its trade secrets, that usually means the prospective employee must be subject to a more detailed set of obligations concerning the trade secrets. In such cases, it may be better for the company to require the employee to sign a separate non-disclosure agreement.
Second, one must have in place and enforce internal security measures to keep the trade secrets confidential. That generally means requiring all directors, officers, and other employees of the company to ensure the trade secret documents are placed in secure locations. Depending on the nature of the documents, the secure locations may mean physically safe locations that are out of reach from and not visible or accessible to the persons who are not granted access to such information, or digitally safe locations that are password-protected, whether offline or online.
Lastly, just like one would require its employee to sign a non-disclosure agreement, one would need to do the same with other companies that may access the company’s trade secret information during the scope of the other companies performing services or providing goods. Such an agreement must ensure any person from the other companies accessing the trade secrets must not disclose or use them not only during the term of the agreement but also upon and after the termination of the agreement.
In sum, imposing contractual obligations on employees and other companies as to the maintenance of the secrecy of one’s trade secrets is crucial because it leaves a good track record of showing that the company has taken reasonable steps to keep such information confidential, rendering the subject information a protectable form of intellectual property, and also because it allows your company to sue a person who steals your trade secrets for breaching his/her contractual duties.
Trade secret issues and solutions vary significantly depending on the facts of each case. This blog recites some principles and tips for informational purposes only, and it is not intended to constitute, and does not constitute a substitute for, legal advice to any person or entity.
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