Trade secrets are what make your business unique.
They are your secret sauce, or ‘Grandma’s Secret Recipe’.
They make your product or service different from everyone else out there.
They are also the most ignored form of intellectual property today.
Here are 10 things you should know in order to start protecting your valuable intellectual property today.
1. A trade secret is any formula, pattern, device or compilation of information which is used in one’s business to give him an advantage over competitors who do not know or use it. Trade secrets include special manufacturing methods, processes, techniques, chemical formulas, computer software, data, and customer lists.
2. Trade secrets are important. I always like to ask my clients, how they would react if they found out that their #1 sales person just left to work for the biggest competitor and took their customer list and pricing information with them. How would you react? Would you get a pit deep down in your stomach?
If that thought scares you, then you know how important your trade secrets are to your business. Those client lists and that pricing information could be trade secrets, and if you aren’t taking active steps to protect them, then that information could be walking out the door.
Now imagine if that person left with your test data, a prototype, the secret formula to your…I think you get the idea.
3. Trade secrets are protected by law. However, trade secret law is not uniform across the United States. Contact an attorney in your state to understand the specific laws governing trade secrets where you do business. If you are doing business overseas, contact an attorney in the foreign country to see what you need to do to protect your IP in that country.
4. Unlike patents, trademarks or copyrights, there is no registration process for trade secrets. They reside within your business and you must protect them.
5. Trade secrets don’t expire. They can potentially last forever if you can keep the secret that long. There is always the risk that an independent third party may legitimately discover and use the secret.
6. To protect your trade secrets, you should:
- Identify them! (You have to be specific. Not everything in your business is protected under trade secret law.)
- Limit employee access. Disclose your trade secrets on a need-to-know basis.
- Limit visitor’s access. Have all visitors sign-in. Provide badges to indicate they are visitors in the building. Don’t let them wander around. Accompany them around the building. Avoid showing them sensitive areas.
- Provide an education. Make sure your employees understand their obligations when it comes to all of your intellectual property, including trade secrets.
- Have confidentiality agreements, written policies, and internal procedures for employees.
7. If you need to disclose your trade secret to a third party, you should take certain precautions before you disclose your trade secret. Any trade secret disclosure to third parties, i.e., customers, suppliers, consultants, etc., should be limited to only those people who NEED TO KNOW under a written agreement of confidentiality of indefinite length. (Again, check with an attorney in your state to find out the exact steps you need to take to protect your trade secrets.)
8. It is a crime to steal a company’s trade secrets. In the United States, perpetrators of trade secret theft are prosecuted under the Economic Espionage Act of 1996.
9. With the rise of the internet and technology, it is easier than ever for your employees to steal trade secrets. What used to be a labor intensive type of theft, think photocopying documents after everyone else goes home, is now easier than ever with the help of technology we use every day. An employee can simply download files to a thumb drive and walk out the door.
10. As we discussed last week, trade secret theft is on the rise. Protect your valuable intellectual property by learning what you need to be doing today to stop trade secret theft in your organization.
Bonus Question. Can you name the most well-known trade secret in the world? Let me know your guess in the comments below!
Next week, I’ll talk about some recent high-profile trade secret theft cases.