You should know how to apply for trade secret protection if your company possesses valuable information that could damage the business if it becomes known to others. A trade secret must consist of previously undisclosed information with commercial value, and the business must have taken reasonable steps to protect the secrecy of this information. In the U.S., trade secrets are protected by federal and state criminal statutes, state civil statutes, and common law.

What Is Considered a Trade Secret?

Trade secrets commonly fall into two main categories. The first is technical information, including the processes you use for manufacturing, business and financial information, product formulas and designs, and unique computer code. The second is customer information, including lists of clients and their preferences, marketing and business plans, and information about pricing.

Common examples of trade secrets include product formulas and recipes, algorithms, and distinctive formulation and production methods.

Ask the following questions when determining whether a piece of information constitutes a trade secret:

  • Do others outside of the company know the information?
  • Has the information been widely shared with employees, vendors, and others within the company?
  • Have you already taken steps to keep the information secret?
  • What value does the information have for your business?
  • What value would it have for your competitors?
  • How much time and money did your company spend to create or gather the information?
  • How challenging would it be for others to obtain or copy the information?

What Steps Can I Take To Protect Trade Secrets?

Every company should have a written policy in place about how employees and other stakeholders handle confidential information. Establish a policy to protect your trade secrets and make sure all your employees know about and comply with the policy. The goal of the policy is to keep competitors from accessing the secret information.

A trade secret policy is critical because employees are often the source of revealed trade secrets, whether they do so inadvertently or for personal gain. They are less likely to reveal this information if they understand the inherent risks of doing so.

The policy should also delineate a system for marking documents that contain trade secrets. This prevents employees from unveiling trade secrets accidentally and allows you to prove that a document was purposefully disclosed. The most valuable trade secrets should be isolated with limited access. This is especially important for computer files that contain trade secrets.

Distribute a copy of the trade secret protection policy and explain its contents to all new employees. Be clear that exposure of trade secrets on the employee's part will result in legal action and termination of employment. Employees with access to trade secrets should also be required to sign confidentiality agreements.

When working with third parties, including vendors, computer programmers, financial advisors, and other consultants, require them to sign a confidentiality agreement. This allows you to share the trade secrets they need to assist and advise your business without risking an information leak.

You may want to keep the public from entering your facilities if trade secrets are visible there.

Why Should I Protect Trade Secrets?

Your company's trade secrets contribute to your edge in the marketplace. Keeping this information confidential can also drive innovation and increase profits by attracting investors who are interested in your intellectual property.

Unlike other forms of IP, trade secrets do not need to be legally registered to be legally protected. Instead, you should use internal classification systems to avoid the public disclosure associated with patents and other forms of IP protection.

To understand the difference between trade secrets and other types of IP, consider Google's PageRank algorithm. The algorithm itself is considered a trade secret, while the process the site uses to rank pages is patented and the name of the software is trademarked.

Patent protection can only be obtained for certain designs, processes, and inventions. Trade secret protection is available for any information or idea that is secret and gives your company a competitive edge. While trade secret protection is indefinite, patent protection only lasts for 20 years in the U.S. Having a trade secret doesn't protect others from independently developing the same information, unlike a patent.

If you need help with applying for trade secret protection, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.