A trade secret is a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information that is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors or customers.
There may be secrets about your business that give you a competitive advantage over your peers. For example, these secrets may be in the form of customer lists developed after many years of hard work, or they may be formulas, secret recipes, or methods of solving particular kinds of problems.
In each of these instances, you may have a “trade secret”. Your trade secret may give you protectable rights as long as the strategic business advantage is a “secret” and gives your business an economic advantage. Remember, once the cat is out of the bag, a trade secret vanishes. For this reason, it becomes very important that you properly protect your trade secrets.
Here are some tips you can follow:
- Determine if you should patent it rather than keep it a trade secret.
If your secret process can be reversed, engineered, or easily discovered by third parties, you might consider filing a utility patent application. This will disclose your trade secret to the world in exchange for a potential monopoly right, starting 20 years from the filing date of your patent application. A patent application is often used in this manner – a disclosure in exchange for a monopoly right.
- Document your trade secrets.
If you decide that trade secrets are right for you, document your trade secret with great detail by writing it down on a piece of paper or in a word processing program. Put a strong password that you will remember on your electronic document (e.g., for example, there are settings in Microsoft Word that allow you to put a password on a document) to limit distribution. If the trade secret just remains in your mind or in the mind of your employees, it will be very hard to prove that you later possessed the secret.
- Secure your trade secret.
Once you have documented your trade secret, you should take active steps to preserve the date of your trade secret. Unless you do this, you will have a very tough time in court proving your trade secret was created on a particular date, and on a date before the alleged theft. To document your trade secret, consider:
- (a) Secure bank account that is never open. Consider placing a printout of the trade secret you documented in a bank safety deposit box that you never open until there is a dispute and your attorney accesses the box for you. Make sure to save the bank records to prove this. If your safety deposit box is frequently accessed, it will be difficult to prevent a challenge that the document was not later altered.
- (b) Preserve electronic evidence of your trade secret. Hire a computer forensics company to preserve an electronic meta data associated with your trade secret so that later you can prove a date of creation. For example, if you are in the San Francisco Bay Area, we recommend Jon Berryhill at Computer Forensics, to backup and forensically preserve your data.
- Limit the distribution of your trade secret.
Take active steps by implementing internal policies that prevent the trade secret from being generally shared. Make sure each employee and contractor are under strict confidentiality obligations through their employment contract. Keep the trade secret in the hands of very few, trusted employees at most.
This article presents the views of the author and do not necessarily reflect those of LegalForce RAPC or its clients. The information presented is general information and for educational purposes. No legal advice is intended to be conveyed; readers should consult with legal counsel with respect to any legal advice they require related to the subject matter of the article.