One of the most valuable assets a business has may be its trade secrets, and most businesses have them. Trade secrets include, among other things, customer lists, supplier lists, secret formulas, processes and the like.
In order for an item to be considered a trade secret, it must be both kept confidential and provide the business with a commercial advantage.
The Commission on the Theft of American Intellectual Property estimates that the annual cost to the U.S. economy of counterfeit goods, pirated software, and theft of trade secrets exceeds $225 billion and could even be as high as $600 billion.
In light of this, are you sure you’re doing everything you can to protect your business’s valuable trade secrets?
The first thing you should do is conduct a “trade secret audit” to identify your business’s trade secrets. Once you know what your trade secrets are, protect them by following these guidelines:
1. Label copies, whether tangible or digital, as “confidential” or “trade secret.”
2. Keep tangible copies of confidential information in a locked room, safe or file cabinet, accessible only to those who need access to that information to properly perform their jobs.
3. Password-protect company networks. Use separate need-to-know network areas for confidential information. You should also consider encrypting the information.
4. Teach employees how to protect trade secrets and explain why it’s necessary.
5. Prohibit employees from using flash drives, unless that use is required for the person’s job, since these portable drives make downloading confidential information quick and easy. You can also obtain software to alert you when files are copied to external devices.
6. Employees, independent contractors and others with access to confidential information should be required to sign nondisclosure-nonuse agreements (often called “NDAs”) before being granted access to the trade secret information.
7. Make sure all employees and independent contractors know who to contact if they have any questions about your trade secret policy or whether certain information is considered confidential.
8. Require visitors to sign in and out, and do not allow them to be in any areas containing confidential information without an escort.
9. Conduct exit interviews with employees, reminding them of their continuing legal obligations with respect to your company’s trade secrets and other confidential information. Also, make sure you get back all of your business’s property.
10. Scrub the drives of any electronic devices (including computers, smart phones and copiers) before disposing of them.
11. So that you can take advantage of the benefits of the federal Defend Trade Secrets Act (DTSA), which took effect last May, make sure all agreements with employees and independent contractors that have clauses protecting confidential information include an appropriate whistleblower protection notice.
Please feel free to contact us if you’re interested in obtaining more information about how to protect your trade secrets or updating your agreements with employees and independent contractors.
