A trade secret policy is a rule that protects private business information that gives a business an edge over its competitors. This includes marketing strategies, software, methods of distribution, pricing, consumer data analysis, and so on.

Trade Secret Policy Overview

Trade secret policies supply businesses and their owners with optional ways to protect their intellectual property that shouldn't be exposed to the public and might need to be protected for a limitless time.

The following are considered trade secrets under the Uniform Trade Secrets Act (UTSA):

  • Assets that are valuable because they're not known generally
  • Assets that are reasonably subject to protection

To prove that a trade secret was misappropriated, an entity has to provide evidence the compromised or usurped information is a trade secret and that it was misappropriated (acquired by another entity through an underhanded means). The misappropriation of a trade secret often takes place in the form of an ex-employee who exposes insider information of his or her previous company to his or her new employer, contractor, or third-party vendor.

Observations have revealed that the theft of most trade secrets happens in situations, where the owner of the stolen trade secret had some kind of close relationship with the individual who misappropriates it through a business or employment.

For a business to win a trade secret case, it has to have proof the trade secret was reasonably secured by strict measures to keep it from unauthorized access. As a result, businesses ought to always make sure their trade secrets are reasonably safeguarded against the unauthorized access of potential competitors.

Trade Secret Protection

If a court discovers any proof a company failed to reasonably safeguard its trade secret, the allegedly compromised information in question will be deemed an invalid trade secret, which will result in the failure of the company's claim of trade secret misappropriation. Federal courts state that nondisclosure agreements (NDAs) with employees and business partners are the most essential factors for companies taking reasonable measures to protect their trade secrets.

The following are included among the eight classes of an extensive trade secret protection plan:

  • Making of policies, agreements, and records to provide proof of protection
  • Establishment of strict measures of confidentiality, and electronic and physical security
  • Assessment of risks to indicate the possibility of compromising a trade secret
  • Doing due diligence and effectively managing ongoing third-party procedures
  • Setting up a team for information protection
  • Building the capacities of employees and third parties via training
  • Tracking and evaluating corporate efforts
  • Taking remedial measures and progressively enhancing procedures and policies

More on Trade Secret Protection

Most businesses are aware of the importance of electronic and physical security in protecting their intellectual property. Courts are also progressively emphasizing the importance of those forms of security. The courts consider companies that include specific materials in a registry of trade secrets to have made reasonable effort to secure their confidentiality. Third parties, such as suppliers, joint venture partners, distributors, and customers can access the trade secrets of a company for one reason or the other, some of which are product development, manufacturing, or some other collaborative undertaking.

Therefore, a non-disclosure agreement with third parties should be deemed a reasonable protection effort. However, agreements aren't enough. Companies ought to make trade secret protection a part of their criteria for due diligence by continually conducting reviews of processes to keep business-related information confidential, and by regularly communicating with collaborators about trade secret non-disclosure expectations.

Training is vital for employees and third parties to know how to handle a company's sensitive information. Failure to make such training available can result in a company's lack of legal protection regarding trade secrets.

Increased Risk Requires a Specialized Security Team

Information digitization, the complex supply chains, potential cybercrime, and the movement of employees from one company to another across geographical locations have all heightened the risk of compromising trade secrets.

Therefore, when no particular person or group is assigned the specialized duty of safeguarding the trade secret of a company, problems are bound to arise. Courts frown at the failure of companies to assign a specialist or a group of specialists to the specific function of securing their trade secrets. Efforts to safeguard trade secrets ought to be tracked yearly, and techniques should be improved to sustain consistency and to make sure every party complies.

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