Tricks of the Trade(secrets) Part 6

How does the business owner treat confidential information so it qualifies as a trade secret? The specific answer depends upon the nature of each business. It also depends upon its size, as well as the state in which a business is primarily located. However, there are approaches to elevating confidential information to trade secret status that are judicially recognized in all jurisdictions. Consequently, business owners should combine approaches discussed below to optimally prevent and remedy misappropriation or improper disclosure.

There are numerous recommendations for in-house format of trade secrets, as well as restricted physical access thereto. For example, businesses of all sizes may possess identical confidential information in numerous forms. Such situations could include a customer list in paper copy within a locked drawer, along with a master copy in electronic format. Electronic business information is best protected when encrypted and combined with a complex password that is periodically and automatically changed. There should also be limited access in both paper and digital formats with respect to premises location and personnel on a very narrow need to know basis. For large companies there should be levels of confidentiality with increasingly limited access to personnel, and with prominent designations ranging from CONFIDENTIAL to TOP SECRET. All businesses should implement prominent stampings stating CONFIDENTIAL for both paper and digital formats.

For electronic confidentiality, there should always be an enforceable office policy to preserve confidentially of software and source code, be it a customer product or part of business infrastructure. Moreover, copyright registration deposits of computer programs should be reviewed for potential trade secrets. If potential trade secrets are imbedded therein, the business’s attorney should identify them and then remove them prior to submission to the United States Copyright Office. In passing it should be noted that this is a significant advantage of copyright registration, because in most instances trade secrets can be removed without forfeiting copyright registration. In a similar vein there should also be review of patent applications prior to publication, and products prior to sales, for trade secrets disclosed therein or related thereto.

In addition to technical and spatial in-house requirements, the human component requires yet another series of recommendations. For employees, examples of widely accepted trade secret requirements include contracts and an internal in-house confidentiality policy. The business owner should also distinguish between restrictions on a former employee’s employment and those for confidentiality of the former employer’s trade secrets. Geographic and temporal restrictions on a former employee’s livelihood are discouraged by courts, and in some states they may be unenforceable. However, restrictions that protect the former employer’s trade secrets are liberally upheld, so with great employee mobility in a particular industry a global restriction on disclosure of trade secrets may be enforceable.

Businesses should obtain each employee’s agreement to confidentiality restrictions prior to commencing employment. If the employee does not sign a non-disclosure agreement until after commencing employment, then the employer must provide an additional bonus, promotion or salary increase. Employees should also be notified to refrain from publishing articles or giving presentations, even in-house, without the authorization of management and its legal counsel.

© 2010 Adrienne B. Naumann

Ms. Naumann does not sponsor or endorse the advertisements at


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