Trade Secret Protection

Trade Secret Protection

Courts require the possessor of a trade secret to take reasonable measures to protect the secret. If reasonable and appropriate precautions are not taken to prevent a trade secret's disclosure or observation, trade secret protection may be lost. A nondisclosure agreement not only helps establish a trade secret, it also helps prevent misappropriation.

The amount of effort or money a trade secret holder spends developing a secret is a factor in determining whether a trade secret exists. The larger the expenditures, the more likely a court is to uphold trade secret protection.

Courts typically require that trade secret information be marked confidential, or in some similar fashion, and be kept under lock. Additionally, trade secret processes and equipment should be isolated (where possible) in a restricted area. If the information is readily ascertainable from sources available to others, or if it can be analyzed or reverse engineered from products on the market, it is generally not considered a trade secret.

Reasonable measures
One of the most common defenses raised by defendants in trade secret misappropriation suits is that the trade secret is no longer a secret. However, the requirement that the owner of a trade secret keep it secret isn't absolute. The owner must merely take "reasonable measures" to preserve his or her secret. Some of the measures that courts have considered in determining the sufficiency of the efforts of trade secret owners to maintain secrecy are the:

• Requirement by the trade secret owner that employees of the owner sign a non-disclosure agreement
  
• Requirement by the trade secret owner that employees of the owner sign a non-competition agreement
  
• Degree of physical security of the trade secret owner's facilities, such as office space, equipment and computer systems, including whether the owner records the location of each copy of the confidential information
  
• Trade secret owner's policy to reveal the trade secret only on a "need-to-know" basis
  
• Efforts of the trade secret owner to educate employees of the owner as to what is secret and what the proper uses of secret information are
  
• Use by the trade secret owner of proprietary legends on products that embody the trade secret
  
• Efforts of the trade secret owner to diminish the likelihood of disclosure of the trade secret by debriefing departing employees of the owner and reminding those employees of their continuing obligation to preserve the trade secret
  
• Requirement by the trade secret owner that departing employees of the owner sign a termination agreement that acknowledges the employee's understanding of his or her continuing obligation to preserve the trade secret.

On the other hand, courts have found that trade secrets have not been adequately protected when:

• employees were given no indication as to what specific subject matter was confidential,
• no signs were posted in areas where the trade secrets were located,
• there were no locked fences or guard at the facility,
• blueprints and drawings involving the trade secrets were left on the floor and in trash containers,
• visitors were permitted to tour the facility without a confidentiality agreement, and
• the trade secret was published in a magazine or the company's annual report.