Trade Secrets are Valuable Assets to a Company

July 22, 2013By 0 Comments
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Even though a there isn’t a federal registration system implemented to formally protect trade secrets, they can be a valuable asset to a company.

A trade secret is generally defined as information such as a formula, process, device, idea, business method or the like, that provides the owner with a competitive advantage in the marketplace, and is protected in a way that prevents the public from obtaining the information.

Examples of trade secrets include: the formula for Coca-Cola, recipe for Kentucky Fried Chicken, the combination of ingredients used in Thomas’s English Muffins, methods of doing business used by the Starwood Hotels, and the formula used in WD-40.

The value of a trade secret is separate and distinct from the value of the product, and lies in a company’s ability to protect the information and keep it secret from the public or other competitors.  There is not much protection for the owner of a trade secret if a third-party independently discovers the secret by reverse engineering the process or independent discovery, however there is protection from misappropriation of trade secrets by others.

Like the Uniform Trade Secret Act, FUTSA prohibits “misappropriation” of trade secrets and provides certain remedies. In addition, Florida law may impose criminal penalties for stealing trade secrets. See Fla. Stat. § 812.081.

Trade secrets are a valuable asset to a company.  Unlike a patent, or copyright, they never expire, and can be kept confidential indefinitely.  The protection of a trade secret must begin with the identification of the process, product, business method, customer list or the like that is the trade secret.  Then systems and methods must be implemented to protect the secret from misappropriation.

Control must be maintained over the handling of the secret aspects of the trade secret.  This can be done by controlling the accessibility of the trade secret, and requiring employees or contractors to sign non-disclosure or confidentiality agreements prior to access of the trade secret.  The documents need to carry a legend denoting the confidential character of the material and it must be stored in a secured location.

It is also advisable to maintain a log of individuals having access to the secrets. Similarly, an internal company policy must exist which clearly informs all exposed employees of the company’s ownership of the secrets and the obligations for use and control.

Most often, former employees and business associates are the biggest threat to a company’s trade secrets.  Thus, the assets must be retained as secrets in order for legal recourse by the business owner. Legal enforcement of ownership rights depends on the proof that the trade secrets were made available to a third-party from a confidential inventory of the secrets under a written contract.

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The author of the blog posts on IPGAL is a registered patent attorney. She has several years of experience in the chemical and electrical engineering fields. For additional information, or to contact the IPGAL, please email her at THEIPGAL@gmail.com

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