How to Keep Your Business Secrets Secret

Most businesses at some point will have information that helps it to be successful which it wants to keep secret. It may not be the formula for Coca-Cola or the “secret sauce” for McDonalds, but most business will have some information that it would not want in the hands of a competitor. Unfortunately, some business owners, in their enthusiasm to get their business off the ground and get their product or service to market fail to take the necessary steps to ensure that the secrets they are developing and relying on for the success of their business remain with the business, and are not stolen by competitors or even their own employees. A “trade secret” is “any information” that has independent value to its owner because it is not generally known to others in the industry. Because it can include “any information” not generally known to others, the scope of protectable trade secrets is much broader than what can be protected under patent, trademark or copyright law. For example, a trade secret could be formulas or methodologies like Coca-Cola formula or KFC’s 11 herbs and spices, or it could be the identity of suppliers that gives you a price advantage, or it could be a specific design of a product that makes your product superior to others. Many businesses will consider their client or customer information to be valuable information they want to keep secret. By contrast to patents and trademarks, there is no single source to register a trade secret. Therefore, the key for a business to protect their valuable information is to develop as many policies and protocols to maintain the secrecy of the information (or in legalese, the information must be “subject to reasonable efforts to maintain its secrecy”). Examples of steps that can be taken to maximize trade secret protection include:

• Implementing written policies and procedures to ensure that trade secret information is kept secret and only disseminated or used on a need to know basis, for example, having trade secret information protected by passwords, locks, or stored in a method so that only those who “need to know” can access it;
• Requiring any employees, independent contractors or third parties vendors who may receive trade secret information sign confidentiality or non-disclosure agreements;
• Clearly identifying trade secret information as confidential on documents or other tangible locations where it may appear and having specific disclaimers on any items containing trade secret information;
• If protection is sought for information that was developed over time (e.g. customer or vendor lists), objective evidence showing the time, effort and methodology that was required to develop the information, and that the information was not merely summarized from sources available to the public. For example, a customer list derived merely from copying the phone book would probably not be a protected trade secret, but if the business created a customer list by using a phone book to specifically contact and, through a vetting process, identified only those individuals that met the specific customer profile of the business, such efforts may result in a protectable trade secret.

This is certainly not an exhaustive list, and what are “reasonable efforts to maintain secrecy” will depend on your particular business. Since there is no single database which you could simply list your trade secret and get the protection, the ability of a business owner to maximize trade secret protection depends on its willingness to implement as many procedures as reasonably possible specifically designed to maximize the secrecy of the information. It is no accident that Coca-Cola was able to protect its formula from being misappropriated by others for over a hundred years due to the extensive efforts devised by its original founders to maintain its secrecy. Although most businesses would not go to the same extremes as Coca-Cola, their ability to utilize trade secret protection to become a global multinational conglomerate is a testament to the power of trade secret protection.