What is a trade secret?
In the most basic sense, a trade secret is any information for which you take reasonable measures to protect as confidential, provided it has some economic value due to its confidential nature.
That’s a broad definition and it includes many types of information such as formulas, computer code, pricing strategies, customer lists, technical data and more.
Understanding trade secret laws
There are laws at both the state and federal levels to help you protect your trade secrets. For starters, your information may be protected under the federal Defend Trade Secrets Act. And even if not, there is a good chance your state has adopted some form of the Uniform Trade Secrets Act.
While the laws differ, they share some basic common elements regarding protecting your information and preventing misappropriation.
What is misappropriation?
If someone acquires, uses or discloses your trade secrets, without your permission, then they may be liable for misappropriation.
This means you can use those state and federal laws to seek an injunction against them (to stop further misappropriation) and you may also be entitled to various from of damages from actual to punitive damages.
How to protect your trade secrets
There are many ways to protect your trade secrets and the tips in this section of this article are probably the most important things you should take away after reading it.
For starters, you should take reasonable measures to protect your trade secrets because this is one of the core requirements for claiming information is a trade secret. For physical documents, this means using locked file cabinets or a safe. For electronic documents this means limiting who has access to the files. Of course, there is more to it than that, but you get the idea.
From there, you might consider stamping the information as “CONFIDENTIAL.” That is a nice step to take but is not necessarily a requirement.
And most important, you should consider using written Non-Disclosure Agreements (NDAs) with anyone who has access to your trade secrets. An NDA is exactly what you would expect — an agreement that says one, or both parties, will protect the other party’s confidential information.
Most NDAs will include a definition of what constitutes “confidential information” and will elaborate on what the recipient can and cannot do with the information. For example, the agreement may prohibit them from disclosing the information to third parties or using it for any purpose other than the purpose stated in the agreement. The agreement might also require the recipient to protect the information using a reasonable degree of care.
When signing an NDA, you should always review the term (the length) of the obligations, and you should double check whether there are any other obligations in the agreement. Sometimes NDAs will include non-solicitation and non-compete style language, which may or may not be appropriate for your situation.
Also keep in mind that you might not sign a stand-alone NDA. Rather, you might just include confidentiality provisions in a larger agreement, such as an employment or contractor agreement.
If you don’t have a good NDA template, you can hire a lawyer to help draft one for you, or you can find one online. Just be careful with what you find for free online because it may not be well drafted, or it might not fit your situation. You can also purchase attorney-drafted NDAs online.
This article is general in nature and is not legal advice. You should speak to a licensed attorney about your unique circumstances before relying on this article.
Chris Brown represents startups, freelancers, and small businesses through his law firm, Pixel Law. He also co-founded Contract Canvas, a digital contract platform for creative professionals. You can find him on Twitter @thepixellawyer.
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