Trade secrets are a form of Intellectual Property (IP) protection for companies’ proprietary information. Trade secret protection covers any confidential information that is both unknown by others and also provides the company with a competitive edge or economic advantage in industry because it is generally unknown. Trade secret protection applies to a wide variety of information, including business information like customer lists, forecasts, and market analysis and also technical information like formulas, programs, source codes, methods, processes, or any other valuable information.

Trade secrets have traditionally been protected by state law, and nearly all states have adopted the Uniform Trade Secrets Act (UTSA), which does not limit the form that a trade secret may take as long as it stays a secret. In 2016 Congress passed the Defend Trade Secrets Act (DTSA), which provides additional federal protection for trade secrets and, like the UTSA, allows for trade secret protection for a wide range of information. Under the DTSA and UTSA, a trade secret (i) derives independent economic value from not being generally known to or readily ascertainable by other persons who can obtain economic value from its disclosure and use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Put simply, to stay a trade secret the company must make reasonable efforts to prevent its disclosure. Here, we’ll summarize the top six (6) things your company can do to make sure your trade secret stays a trade secret. These are general guidelines; be sure to consult with a qualified intellectual property attorney to assess your particular situation.

1) Implement Written Confidentiality Agreements: Many trade secret cases arise out of a former employee misappropriating a trade secret acquired from an employer. Using restrictive covenants in employment agreements, including “confidentiality,” “non-compete,” and “non-solicitation” agreements may help protect both trade secret and other confidential information. Any employee who has access to trade secret information should be required to sign an employment agreement, and such agreements should at a minimum contain strong confidentiality provisions that remain in effect after employment ends. Non-compete clauses should be considered also, but the law currently disfavors non-compete clauses, so be careful with using those.

Also important is the use of a non-disclosure agreement (NDA) for anyone outside the company to whom the trade secret is disclosed (including contractors, vendors, consultants, and other third parties). An NDA contractually limits disclosure of trade secret information without issues of enforceability that accompany restrictive covenants. NDAs constitute strong evidence that the company considers certain information to be secret. Further, by utilizing NDAs, the company has a breach of contract claim in addition to a trade secret claim for the disclosure of proprietary information.

To be effective, the confidentiality agreement or NDA should describe the trade secret information and be signed before having access to the information. While a more general description provides flexible coverage, specific descriptions are more likely to eliminate any debate about whether particular information is considered a trade secret. But be careful with your agreements: if the NDA is over-inclusive, for example, by: 1) prohibiting an employee from using general knowledge, 2) prohibiting disclosure of public knowledge, or 3) extending to information provided by third party sources, there is potential for a court to invalidate the entire NDA.

2) Clearly Mark Sensitive Documents: Documents that include trade secrets should be labeled as “confidential,” “highly confidential,” or “trade secret” to clearly identify the confidential information and ensure controlled or limited circulation. The marking may be labeled in the title of the document or included as a watermark.

3) Limit Access to the Secret Information: Trade secret information should not be generally available to all personnel, contractors, or third parties. Use physical and technological restrictions to limit access to secret information to only those who require it to do their jobs. Here are some examples:

Limit Physical Access:

• Control physical access to the trade secret by keeping in a locked room, safe, high security area of the building, etc.
• Utilize employee ID badges to selectively permit access into restricted areas containing trade secrets.
• Use video surveillance on restricted areas and maintain security monitoring (including after hours).
• Maintain logs of facility access.
• Have a visitor protocol, including recording visitor entry/egress and signing confidentiality agreements.
• Restrict the use of personal devices and/or photography devices in sensitive areas.

Limit Technological Access:

• Segregate trade secret information on your network and ensure that network settings only allow the appropriate employees to access the information.
• Limit access to documents including trade secret information by using passwords and require routine password changes.
• Track the distribution of trade secret marked documents and maintain access logs for files containing secret information.
• Provide employee laptops and have policies restricting access to trade secret marked documents on personal devices.
• Implement cyber security protocols such as: requiring routine password changes to employee devices, limited remote access to company records, requiring multi-factor authentication for computer access, and utilizing antivirus software.

4) Monitor and Audit Access to Information: Continuously monitor the individuals that access to trade secret information and implement policies to periodically audit which employees “need to know” this information. Ensure that departing employees return or destroy trade secret information that they accessed. Finally, implement a company-wide retention policy to dispose of sensitive information.

5) Educate and Train Employees: Create a culture that prioritizes maintaining confidentiality. Provide regular employee trainings on handling confidential information, including trade secrets, and provide mechanisms for providing suspicious activity.

6) Ensure Licensee’s Obligations to Protect the Trade Secret: Trade secrets may be licensed to others without losing protection. Licensing agreements should include a provision obligating the licensee to protect the trade secret information, including taking the actions identified above.

As mentioned, the six actions listed above are general guidelines and you should be sure to consult with a qualified intellectual property attorney to assess your situation. With these steps in place, though, you should be in a great position to defend your trade secret rights.