Pssssst, Can You Keep a Secret?

Most successful businesses have secrets. After all, absolute transparency plays right into the hands of copycats who want to ride upon your success without putting in the hard work. From client lists to secret formulas to simple marketing plans, your business relies upon trade secrets to succeed and keep competition at bay. So how do you make certain that your secrets remain secret? Your ability to stop anyone who stole your trade secrets from using them will depend on the steps you have taken to maintain their secrecy.

Ohio law, like that of most states, provides a remedy to anyone who has their trade secrets misappropriated. Trade secrets, by definition, can be any information, design, process, procedure, formula, pattern, compilation, program, device, method or technique. To qualify for protection, however, the trade secret must derive economic value from not being generally known. The trade secret also must be the subject of “reasonable efforts” to maintain its secrecy.

So, what “reasonable efforts” are you taking to protect your valuable business information? All too often business owners fail to identify and protect their trade secrets prior to an employee leaving to work for a competitor.

In one Ohio case, an employer had the employee sign a non-disclosure agreement only one month before firing the employee, even though that individual had access to the trade secrets at issue for almost a year before that time. Further compounding matters, the employer failed to take active steps to retrieve company computers and other items used by that employee until almost six months after termination. Not surprisingly, the court found that the employer had not made reasonable efforts to protect the trade secrets from disclosure. With trade secrets, as with horses, once they have bolted the stable, it is too late to close the door.

So what are reasonable efforts? No, you do not have to install iris scanners or relocate all copies of your customer list to a safe-deposit box. Instead, exercise common sense and take appropriate steps based upon the value and nature of the trade secret.

First, take a few minutes to inventory your trade secrets. Do not wait for your information to be compromised before you realize its value. Ask yourself what information, formulas and plans do you have that would truly hurt your business if they fell into the hands of a ruthless competitor? Frequently, business owners simply have all employees sign an all-encompassing non-disclosure agreement. While such a step is certainly better than nothing, it may, by itself, fall short of reasonable.

With your inventory in hand, evaluate the nature of your trade secrets and determine which of your employees need to have access to them and which ones do not. A secret manufacturing process may only need to be known by the a few select employees involved in making the product, and certainly need not be known by the sales force.

Once you have determined the nature of the trade secrets and who needs to have access to them, ensure that those who do have access to them sign a non-disclosure agreement. Rather than sticking a form agreement in front of the employee, explain to them the value of the specific trade secret and why you must (and will) take all necessary steps to protect it.

Countless court cases involve employees who insist that they were never told about the confidential nature of the trade secret or given any guidance on how to maintain its secrecy. It is one thing to simply have an employee sign a non-disclosure agreement, it is a far better thing to also establish protocols and instruct them on how to handle confidential information.

The protocols themselves should be tailored to the trade secret. No employee would ever need to take a secret formula home with them. On the other hand, it would often be impractical to have salespeople out in the field without them having access to the client list. If employees are allowed to work from home on their own computers by logging into your company network, you should have policies in place to address downloading, printing or otherwise storing company information.

You should also establish exit interview protocols designed to collect all trade secret information that may remain in the hands of the soon-to-be former employee. The exit interview is also a good time to remind the employee of their obligations to maintain the secrecy of the information and not further utilize it.

If you take these reasonable steps to protect your trade secrets, the law will be on your side when someone misappropriates those trade secrets and attempts to use them. Indeed, even in instances where former employees have relied upon their memory of client lists or other trade secrets (as opposed to taking a copy of the list on their way out the door), courts have issued injunctions to prevent misappropriation.

Trade secrets must remain secret for a reason. The law will not help you in instances where you have failed to take reasonable steps to protect disclosure. Once you have taken those steps, however, trade secret law provides you with an incredibly powerful tool to help you maintain your competitive edge.