How to identify and protect your company’s trade secrets

Trade secrets are among a company's most valuable assets in today’s competitive business environment. Protecting these trade secrets is vital for maintaining a competitive edge and preventing costly legal battles or breaches. However, many businesses struggle to identify what qualifies as a trade secret and how to safeguard them effectively. In this blog, we’ll define trade secrets, give examples of what might be eligible, and offer practical tips and strategies for identifying and protecting your company’s valuable information.

What Are Trade Secrets?

A trade secret is any information that gives a company a competitive advantage, is not generally known or easily accessible, and is subject to reasonable measures of protection by the company. Trade secrets can include a wide range of confidential information, such as proprietary processes, formulas, algorithms, customer lists, and marketing strategies.

According to the Defend Trade Secrets Act (DTSA) and the Uniform Trade Secrets Act (UTSA), for information to qualify as a trade secret, it must meet the following criteria:

1. Economic Value: The information must derive independent economic value from not being generally known to the public or competitors.
2. Confidentiality: The company must take reasonable steps to maintain the secrecy of the information.
3. Non-Obviousness: The trade secret must not be readily ascertainable or easily duplicated by others in the industry.

What Qualifies as a Trade Secret?

Trade secrets can take many forms and vary from industry to industry. Here are some common examples of what might qualify as a trade secret:

• Proprietary Software: If your company has developed a unique software program, algorithm, or coding process, it could qualify as a trade secret if it provides a competitive edge and is kept confidential.
• Formulas or Recipes: Companies like Coca-Cola and KFC have famously guarded their product formulas as trade secrets for decades.
• Manufacturing Processes: Any unique or innovative process for producing goods or services could qualify as a trade secret if it improves efficiency, reduces costs, or enhances quality.
• Customer Lists and Data: Detailed customer information, preferences, purchasing histories, and proprietary market data are often valuable trade secrets.
• Marketing Strategies: Marketing techniques, pricing models, and upcoming campaign strategies that have not been made public can be considered trade secrets.

Why Expert Services Are Important in Protecting Trade Secrets

Protecting trade secrets is a complex process requiring specialized knowledge of law and technology. This is where expert services come in. A trade secret expert can help businesses:

• Identify Trade Secrets: Often, companies don’t realize the extent of their trade secret assets. A trade secret expert can comprehensively analyze your business operations and intellectual property to help you identify what qualifies as a trade secret.
• Develop Protection Strategies: Once trade secrets are identified, experts can guide companies in implementing appropriate security measures, such as non-disclosure agreements (NDAs), physical security controls, and data protection protocols.
• Ensure Compliance with Requirements: Companies must take "reasonable measures" to keep their information confidential to maintain trade secret protection under the law. Trade secret experts ensure that your company meets these standards, which is crucial in defending against misappropriation claims.
• Support Litigation: In the event of a trade secret breach, expert witnesses play a critical role in litigation by helping to prove that misappropriation occurred, assessing damages, and explaining the technical aspects of the case to the court.

Practical Tips for Identifying and Securing Trade Secrets

Identifying and protecting trade secrets requires a proactive approach. Here are some practical strategies to ensure your company’s valuable information remains secure:

1. Conduct a Trade Secret Audit

The first step in protecting your company’s trade secrets is knowing what they are. Conduct a thorough audit of your business processes, products, and data to identify any proprietary information that qualifies as a trade secret. Engage with departments across the organization—from R&D to marketing—to ensure no valuable asset is overlooked.

2. Implement Strong Confidentiality Agreements

One of the most effective ways to protect trade secrets is to require employees, contractors, and partners to sign Non-Disclosure Agreements (NDAs). These legally binding contracts prohibit individuals from sharing or using confidential information outside the scope of their work for the company.

3. Limit Access to Trade Secrets

Only employees who need access to sensitive information should be granted it. Implement a "need-to-know" policy that restricts access to trade secrets to those whose roles require it. This minimizes the risk of accidental or intentional leaks.

4. Selective Offshore Employment

Employing teams offshore can be an effective way to save money, however, it isn't without tradeoffs. Many countries where these teams are located do not respect US intellectual property laws. That means if your employees located there act in bad faith, it's difficult, if not, impossible, to litigate against these individuals and retain control of your IP.

5. Use Encryption and Data Security Measures

In today’s digital age, protecting electronic data is critical. Encrypt sensitive files and ensure that solid cybersecurity measures are in place to protect your trade secrets from hackers and unauthorized access. Regularly update passwords, use multi-factor authentication, and implement firewalls to protect your data.

6. Train Employees on Trade Secret Protection

Educate employees about the importance of trade secrets and their role in maintaining the company’s competitive advantage. Training should include recognizing trade secrets, the consequences of misappropriation, and handling confidential information inside and outside the workplace.

7. Monitor and Track Access to Trade Secrets

Use software tools to monitor who is accessing sensitive information and when. Regularly audit access logs to ensure only authorized individuals view or use trade secrets. This tracking can help detect suspicious activity early and prevent leaks before they happen.

8. Respond Quickly to Breaches

If you suspect a trade secret has been misappropriated, act swiftly to mitigate the damage. Contact legal counsel and, if necessary, engage a forensic expert to investigate the breach. The quicker you respond, the more likely you are to limit the impact of the theft or leak.

Safeguarding Your Company’s Most Valuable Assets

Trade secrets are the lifeblood of many companies, providing a competitive edge that sets them apart from others in the industry. Identifying and protecting these trade secrets is critical to the long-term success of any business. By conducting a thorough audit, implementing robust security measures, and engaging expert services, your company can secure its valuable information and minimize the risk of misappropriation.

At Eureka Software, we specialize in trade secret protection and litigation. Our expert witnesses are highly experienced in identifying trade secrets, ensuring compliance with standards, and providing our intellectual property expertise for legal disputes. Contact us today to learn more about how we can help you protect your company’s most valuable assets.