What do I need to do to keep my “secret sauce” a secret?

Companies often have certain proprietary information that might not be eligible for patent or copyright protection but is nonetheless valuable. This includes source code, algorithms, unfiled or unpublished patent applications, processes, methods, plans or other valuable information. These are trade secrets.

There is no registration process or grant from any government authority for information to be considered a trade secret. Rather, a trade secret is any information that: (1) has economic value based on its secrecy; and (2) is kept secret by its owner.

The second point is the most crucial one for trade secret owners. When trade secret thieves are taken to court, they often assert that the information at issue is not actually a trade secret because the plaintiff didn’t do enough to ensure its secrecy.

A company may not be able to predict when a relationship goes bad and an ex-employee, former partner, or would-be partner walks away with the company’s proprietary information. Accordingly, there are a number of best practices that trade secret owners should implement to not only ensure that trade secret thieves will never prevail on such a defense, but to minimize the likelihood of trade secret misappropriation:

1. Identify and Label Trade Secrets. Start by identifying the information that qualifies as a trade secret within the organization. Clearly label and mark these trade secrets as confidential to emphasize their protected status.
2. Implement Access Controls.Limit access to trade secrets within your organization on a need-to-know basis. Use robust access controls such as passwords, encryption, and user authentication protocols to ensure that only authorized individuals can access and handle sensitive information.
3. Employee Education and Confidentiality Agreements. Train your employees on the importance of trade secrets and the obligation to maintain confidentiality. Implement confidentiality agreements or non-disclosure agreements (NDAs) with employees, contractors, and partners to legally bind them to confidentiality obligations.
4. Physical Security Measures. Physical security is crucial in protecting trade secrets. Secure access to offices, laboratories, or areas where trade secrets are stored. Install surveillance systems, use locked cabinets or safes, and implement visitor control measures to prevent unauthorized access.
5. IT Security Measures. Strengthen the organization’s IT infrastructure to protect trade secrets. Implement firewalls, secure networks, intrusion detection systems, and encryption protocols to safeguard digital assets. Regularly update software and apply security patches to mitigate vulnerabilities. Take steps to ensure that those who do need access to the information cannot transfer to their personal devices.
6. Vendor and Partner Contracts. When collaborating with third-party partners, ensure that confidentiality and trade secret protection clauses are included in contracts or agreements. Clearly define expectations regarding the handling and protection of confidential information.
7. Monitor and Detect Misuse. Implement monitoring mechanisms to identify any unauthorized access or misuse of trade secrets. Regularly review access logs, conduct internal audits, and use data loss prevention (DLP) tools to detect and prevent potential breaches.
8. Enforce Legal Remedies. Be prepared to take legal action if trade secrets are misappropriated or disclosed without authorization. Consult with legal professionals who specialize in intellectual property law to understand the available legal remedies, including civil lawsuits and injunctions.
9. Document and Control Trade Secret Information. Maintain an inventory of the organization’s trade secrets and document the measures taken to protect them. Keep records of access logs, employee training, and confidentiality agreements. Regularly review and update security practices to adapt to evolving threats.
10. Limit Disclosure to Third Parties. Exercise caution when sharing trade secrets with external parties. Only disclose confidential information to trusted individuals or entities under appropriate confidentiality agreements or non-disclosure agreements.

Trade secret protection requires a comprehensive approach that combines legal, technical, and administrative safeguards. By implementing these measures, companies can not only position themselves to prevail against trade secret thieves in court, but reduce the incidence of trade secret theft to begin with and thereby protect their secret sauce.