Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Are You Doing Enough To Protect Trade Secrets?

Author: Scarinci Hollenbeck, LLC

Date: March 5, 2020

Key Contacts

Back

Trade secrets represent one of the most commonly misappropriated types of intellectual property…

While it may not be a super-secret recipe like Coca-Cola, which has been kept secret by the Coca-Cola Company since 1891, most businesses have valuable information that they want to safeguard from their competition. Examples include proprietary computer code, manufacturing processes, databases, and customer lists.

Are You Doing Enough to Protect Your Trade Secrets?

Trade secrets represent one of the most commonly misappropriated types of intellectual property because the information can often be so easily and quietly taken. Technology has also made it easier to steal trade secrets, with employees, contractors, vendors and other third-parties able to download, copy and transfer confidential information electronically.

What Is a Trade Secret?

In basic terms, a trade secret is proprietary information that is not generally known and provides a business with an economic advantage over competitors or customers. In order to obtain legal remedies, trade secret owners must also be able to demonstrate that they have taken reasonable measures to keep the information a secret. Unfortunately, state laws and the federal Defend Trade Secrets Act (DTSA) do not expressly define what types of reasonable measures a company must take.

Reasonable Steps to Protect Your Trade Secret

The DTSA provides a wide range of legal remedies for companies that suffer trade secret theft. However, in order to prevail in a trade secret misappropriation case, one must be able to demonstrate that the stolen information satisfies the definition of a trade secret. That includes being able to show that one has taken sufficient measures to keep the information a secret.

While it may seem obvious, the failure to take any overt action to safeguard a purported trade secret will lead to dismissal of a trade secret lawsuit. It is also important to be able to show that a company treats its trade secrets with greater care than its general company information.

While courts will always examine the unique facts of each case, the following factors will often be taken into account:

  • Requiring non-disclosure agreements: NDAs are an important protective measure when sharing proprietary information with employees, contractors, vendors, business partners, etc. When properly drafted and executed, such agreements make it clear that a company considers specific information to constitute a trade secret, requires the other party to maintain the secrecy of the information, and will take steps to pursue any misappropriation.
  • Cataloging and monitoring trade secrets: Keeping an inventory of one’s company’s trade secrets, how they are protected and with whom they are shared can go a long way in demonstrating to the court that one is serious about trade secret protection.
  • Training employees: Employees must know what information is considered proprietary and what steps they should be taking to protect it. This may involve including a trade secret policy statement in employee handbooks, marking documents as trade secrets, and requiring workers to sign NDAs.
  • Restricting physical/electronic access: Companies should limit access to proprietary information to only those who “need to know” by implementing security controls. Examples include physical locks, password protection, and restricting public access to facilities.
  • Establishing procedures for departing employees: Because trade secrets often walk out the door when employees leave the company, it is advisable to have policies in place that immediately discontinue access to documents, databases and cloud storage systems as well as request that all company-owned devices are immediately returned.

It is important to note that taking some of the above steps does not guarantee that the court will view your information as a trade secret. In addition, there is no one-size-fits-all approach to trade secret protection. What is “reasonable” will vary based on the size of the company, the nature of the information, its value to the company, and other factors.

Key Takeaway

Companies must be proactive in safeguarding their trade secrets. If a company fails to do so, it may be unable to pursue legal remedies, even if valuable information is stolen. For assistance, we encourage you to consult with a member of the Scarinci Hollenbeck Intellectual Property Law Group.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, David Einhorn, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Understanding Chattel Paper: A Key Component in Secured Transactions post image

Understanding Chattel Paper: A Key Component in Secured Transactions

Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]

Author: Dan Brecher

Link to post with title - "Understanding Chattel Paper: A Key Component in Secured Transactions"
Crypto Compliance: A Comprehensive Guide post image

Crypto Compliance: A Comprehensive Guide

For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]

Author: Bryce S. Robins

Link to post with title - "Crypto Compliance: A Comprehensive Guide"
Supreme Court and Title VII: Implications for Reverse Discrimination post image

Supreme Court and Title VII: Implications for Reverse Discrimination

Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]

Author: Matthew F. Mimnaugh

Link to post with title - "Supreme Court and Title VII: Implications for Reverse Discrimination"
SPACs Are Back, What You Need to Know post image

SPACs Are Back, What You Need to Know

Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]

Author: Dan Brecher

Link to post with title - "SPACs Are Back, What You Need to Know"
Short Form Merger: Streamlining the Process for Businesses post image

Short Form Merger: Streamlining the Process for Businesses

Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]

Author: Dan Brecher

Link to post with title - "Short Form Merger: Streamlining the Process for Businesses"
Tariff Response Options for Small Businesses Facing Financial Distress post image

Tariff Response Options for Small Businesses Facing Financial Distress

The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]

Author: Brian D. Spector

Link to post with title - "Tariff Response Options for Small Businesses Facing Financial Distress"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!