LEGAL: Protecting Trade Secrets

Customer lists. Pricing and marketing strategies. Business forecasts. Acquisition plans.

All of these are protectable trade secrets — but only if your company undertakes reasonable efforts to safeguard information from competitors and other outsiders. Your business should address this issue before an employee has departed with confidential or proprietary material and has handed it over to a new employer, who also may be the competition.

These efforts begin with a company and its workplace environment that actively protects company assets, including trade secrets. Orientation for new employees at all levels and in all departments should identify the kinds of information that require special handling and detail how and why such material deserves this treatment. If it doesn't fully spell out the procedures, the employee manual should contain at least a reference to company policy and the name or title of the manager or officer who can answer questions about sensitive information handling. Periodically, the company should provide refresher courses for employees.

Court decisions say that the extent to which a company tries to protect its trade secrets measures the value of company information. After all, how valuable is company information if an owner does not make worthwhile and serious efforts to keep it secret?

“The greater the precautions that … [the owner of the information] took to maintain the secrecy of the … [information], the lower the probability that [the accused thief] obtained them properly and the higher the probability that [the information was obtained] through a wrongful act.” [Rockwell Graphic Systems Inc. v. DEV Industries Inc., 925 F.2d 174 (7th Cir. 1991)]

As expected, the case law does not neatly define how much effort is deemed reasonable. Each business must balance the costs and benefit, and consider the nature of its operations. What works for a relatively large hauling company may be impracticable at a smaller firm, or vice versa.

It is also important to consider the different types of company information and the conditions under which they are used in business. Identify which employees need access to particular types of information to accomplish their jobs. Determine whether restricted access will decrease a competitor's chances of obtaining certain information. Or will safeguards simply make it more difficult to conduct business?

Some companies have banned the disclosure or sharing of computer passwords and codes — even among regular employees — and have issued temporary passwords to consultants, short-term workers and other outsiders.

Key documents and other trade secrets should be stamped or marked “confidential” and physically or electronically locked up when not in use. Sign-in procedures, including security card key access, can track or limit employees' comings and goings. If a company allows its employees to work at home, ensure that sensitive information stored on a home computer is regularly accounted for during employment and fully retrieved when employees leave.

The success of trade secret protection may depend on the extent to which employees realize that they have a personal stake in the integrity of this information. If these valuable assets vanish, jobs also may disappear.