Business executives have recognized the need to protect their practices, formulas or processes which are essential to their business. Senior executives, in recent polls, said that trade secrets are more important than other intellectual property such as patents and trademarks. But proper protection requires effective management of this intellectual property.
Threats and measures
Trade secrets are intangible intellectual property that have substantial economic value because the secrecy of that information provides a competitive advantage for business. Protection is important because there is no public registration system for trade secrets.
Senior corporate executives ranked the most serious threats to trade secrets:
- Cybersecurity: 49%
- Leaks by employee: 48%
- Competitive intelligence: 27%
- Risks from third-party service providers: 26%
- Corporate espionage: 24%
These executives also described measures they believe were effective:
- Installation of computer safeguarding and cybersecurity software: 53%
- Confidentiality agreements and policies: 46%
- Restrictions on digital and physical access to documents: 42%
- Implementing a culture that has incentives for trade secret protection: 31%
- Avoiding cloud storage of important trade secrets: 27%
Trade secrets should be identified before effective and relevant protections can be implemented because their economic value and security risks are different. An internal trade secrets committee and director should identify and classify these secrets.
The standard go/no-go test requires proof that the information is not known generally in the trade, is not readily discoverable by proper means, reasonable measures were taken to protect the information and the owner of the trade secret receives independent economic value from the information’s secrecy.
Courts and juries also rely on a test that contains six factors. First, the extent to which the protected information is known outside the company. The more it is known, the less it is a protected trade secret.
Second, the extent it is known by employees and others involved in the company. Third, the scope of the measures taken to guard the information.
Next, the information’s value to the company and competitors. Fifth, the time, effort and money expended to develop the information. Finally, the ease of difficulty with acquiring or duplicating the information.
Attorneys can help draft agreements that protect these secrets. Lawyers may also seek to protect intellectual property in litigation.