One of the most valuable assets a business has may be its trade secrets.
A trade secret is anything that (i) gives a business a competitive advantage, (ii) has been and continues to be treated as a secret by that business, and (iii) is not generally known in the trade or readily discoverable through public sources.
Virtually every business has trade secrets such as customer and supplier lists, pricing information, manufacturing processes, and marketing data. The scope of trade secrets can include such diverse items as a restaurant’s recipes, a formula for a particular glass color, and a search algorithm.
To ensure that you’re protecting your trade secrets, first conduct a “trade-secret audit” to identify your business’s trade secrets. Once you know what your trade secrets are, protect them by following these guidelines:
1. Employees, independent contractors, and others with access to confidential information should be required to sign nondisclosure-nonuse agreements (often called “NDAs”) before being granted access to the trade secret information. Be sure these agreements are narrowly tailored to protect your business’s interests. Otherwise, a court may refuse to enforce them.
2. Label copies, whether tangible or digital, as “confidential” or “trade secret.”
3. Keep tangible copies of confidential information in a locked room, safe, or file cabinet, accessible only to those who need access to that information to properly perform their jobs.
4. Password-protect company networks. Use separate need-to-know network areas for confidential information. You should also consider encrypting the information.
5. Teach employees how to protect trade secrets and explain why it’s necessary.
6. Prohibit employees from using flash drives, unless that use is required for the person’s job, since these portable drives make downloading confidential information quick and easy. You can also obtain software to alert you when files are copied to external devices.
7. Make sure all employees and independent contractors know who to contact if they have any questions about your trade-secret policy or whether certain information is considered confidential.
8. Require visitors to sign in and out, and do not allow them to be in any areas containing confidential information without an escort.
9. Conduct exit interviews with employees, reminding them of their continuing legal obligations with respect to your company’s trade secrets and other confidential information. Also, make sure you get back all of your business’s property.
10. Scrub the drives of any electronic devices (including computers, smart phones, and copiers) before disposing of them.
11. So that you can take advantage of the benefits of the federal Defend Trade Secrets Act (DTSA), make sure all agreements with employees and independent contractors that have clauses protecting confidential information include an appropriate whistleblower protection notice.
12. Carefully review all policies and procedures to make sure they cover any telework situations. Remind all employees in writing that when they’re working from home, they’re still obligated to:
• keep trade secrets and other confidential information confidential and ensure that third parties (including spouses, partners, children, and roommates) cannot access that information;
• beware of and protect against phishing, malware, and other threats to your business’s systems;
• refrain from transmitting confidential information through personal email, text, cloud, or social media platforms;
• shred unneeded copies of confidential material rather putting them in the trash or recycle bin (or, for employees without a home micro-cut shredder, store them securely until they can be taken to the workplace for shredding);
• avoid having phone calls and video chats that might expose confidential information in the presence of others;
• use only secure WiFi (with a strong password);
• print confidential information only when necessary for work purposes;
• have appropriate anti-malware software and all relevant software updates installed on all devices used to access confidential information; and
• use only company-supplied devices (if applicable).
It’s important for you to coordinate with your IT department or consultant because there are numerous ways that technology can be implemented to protect your business’s confidential information.
Cybersecurity technology includes VPNs, firewalls, tracking/monitoring software, restrictions on access and printing, multi-factor authentication, encryption and even pop-up messages that remind employees when they’re accessing confidential information.
Please feel free to contact us if you’re interested in obtaining more information about how to protect your trade secrets or if you need help updating your agreements or employee handbook.
