Protecting Trade Secret Assets

If you ask the owners of most companies whether they have any intellectual property assets, assuming they know what you are talking about they are likely to say no.  The problem with that, however, is that the answer should universally be a resounding YES!  Every company has intellectual property assets.  The name of your company is an asset that can be protected via various trademark laws, and can generate good will, which is potentially the largest asset of any kind that many businesses will have.  Explained in this way many will at least acknowledge that intellectual property assets exist, but the one type of intellectual property that most businesses completely ignore is the trade secret. 

It is hard to imagine that any business could ever operate without having protectable trade secrets.  The trouble is that most do not know what could be protected as a trade secret, nor do they know how to protect trade secrets.

A trade secret is defined as any business information that is valuable and that derives its value from remaining a secret.  So what information could be protected via trade secret?  Any information that you would not want a competitor to get their hands on could be a trade secret.  I am not talking about top secret, high-tech blueprints for the next gizmo that will revolutionize the world, although that would certainly qualify as a trade secret.  Something as simple as a customer list, supplier list or information regarding profit margins are all things that could be protected.  After all, who would want their customer lists to fall into the hands of the competition?  What if the competition knew where you purchased your products and exactly what your profit margin was? 

The other key to trade secret law is that you must maintain the valuable business information with reasonable precautions to keep the information a secret.  The key here is “reasonable precautions.”  What is considered legally reasonable will vary depending upon the value of the secret.  So if you have an extraordinarily valuable secret recipe, perhaps the formula for Coca Cola, you would want to employ what I refer to as Mission Impossible type secrecy precautions.  Do you remember in the original Tom Cruise Mission Impossible movie where he was trying to break into CIA headquarters?  There were laser alarms, weight sensitive alarms, heat sensitive alarms and he had to break in through ventilation ducts.  If you have seen the movie you know what I am talking about.  If not, suffice it to say that with extremely valuable information you need to take extreme measures to maintain the secrets.  Far more than our friends in the above cartoon.

With most trade secrets you are not going to need Mission Impossible type security.  Keeping customer lists in a file marked “confidential” may be enough.  The trouble with trade secrets, however, is that once the secret is lost so is the asset.  What this means is you never want to do “just enough” to protect the trade secret, you want to do enough to make sure it stays secret.  Keep sensitive information in a file marked “confidential” in a file cabinent that is locked, which is in a locked office to which only those who “need to know” have access.  The more you do to protect your secret information the more the law will be on your side in the event that someone steals the information.  So do what you can.  Passwords, locks, limit access, lock files and treat it like it is valuable. Just don’t leave the information lying around.  You wouldn’t do that to your wallet, would you?


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  • [Avatar for Asset Protection]
    Asset Protection
    November 13, 2009 05:59 am

    Intellectual Property awareness is something that every business needs right now. They should protect theft not only from outside the company but also from within.