Ten Ways To Maintain the Secrecy of Trade Secrets

One of the requirements for information to qualify as a trade secret is that the information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Here are ten ways that employers can maintain the secrecy of trade secrets:

  1. Physical Protections: Keep trade secrets in a locked room, cabinet, or vault. Employers can also use access rights (like key cards) to restrict who has physical access to the trade secret information, or they can maintain a log of individuals who had access to it and when.
  2. Digital Protections: When trade secret information is stored digitally, user accounts and passwords can be used to control who has access to the information. If the information is transmitted via email or download, consider using encryption to prevent unauthorized disclosures.
  3. Label Information as “Confidential.” Although not absolutely necessary, including a label on any documents or information to make clear that it is “Confidential” is helpful.
  4. Destroy Old Documents or Data. Trade secret information should not be placed in publicly accessible dumpsters or recycling bins in readable form. Instead, shred it before disposal. If trade secret information is stored on a computer or hard-drive, the computer or hard-drive should be wipe-cleaned or rendered inaccessible before disposal, too.
  5. Confidentiality Agreements: Require employees who have access to trade secrets to sign confidentiality agreements. Confidentiality agreements should clearly define what information may not be disclosed and should authorize the employer to seek injunctive relief and damages in the result of a breach.
  6. Non-Disclosure Agreements: For vendors or other third-parties who may have access to trade secrets, an employer can require the outside party to sign a non-disclosure agreement. Like a confidentiality agreement for employees, a non-disclosure agreement should clearly define what information is protected and authorize injunctive relief and damages in the event of a violation.
  7. Require Departing Employees To Return Company Property. Employees who terminate their employment with the company should not be permitted to take company data with them. Instead, employment policies or agreements should clearly inform employees that all company data, whether in digital or hard-copy format, must be returned upon termination.
  8. Monitor Employee Emails or File Transfers. Employees should not be permitted to email trade secret data to third-parties or personal email accounts or to copy trade secrets to external devices without authorization. Periodically monitoring employee emails, either using software to detect key terms or via manual monitoring, is one way to detect unauthorized disclosures.  Software is also available that can alert employers when files are copied to external devices.
  9. Don’t Get a Patent. Getting patent protection for an invention requires publicly disclosing how it works. If the protections of trade secret law are more valuable to a company than the limited monopoly provided by a patent, don’t get a patent.
  10. Set a Good Example. If employers want employees to protect the confidentiality of trade secrets, then the leaders and supervisors in the company should set a good example for the employees. If the leaders of the company are careless with trade secrets, the employees will likely be careless, too.

Takeaway: For trade secret protection to apply, an employer must use reasonable efforts to maintain the information’s secrecy. What is reasonable for a particular employer will vary depending on the information protected as well as the nature of the business and the workforce.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on October 30, 2014, in Non-Competition and Confidentiality and tagged . Bookmark the permalink. Comments Off on Ten Ways To Maintain the Secrecy of Trade Secrets.

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