One of the most important assets a company generates and owns is its intellectual property. Some businesses own extensive and complex forms of intellectual property, such as patents, while other business’s may own only trademark or domain name. But these are not the only forms of intellectual property that companies should be vigilant about protecting. Companies should have procedures and contracts in place to guard valuable information that is not known to the general public- these are referred to as trade secrets.
Most states have adopted some version of the Uniform Trade Secrets Acts (Act), drafted by the National Conference of Commissioners on Uniform State Laws in 1970 and amended in 1985. According to the Act, a trade secret is any information that “(i) derives independent economic value, actual or potential, from not being generally known…and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” The significance of information that is classified as a trade secret is the fact that it is unknown to others.
In many cases trade secrets cannot be categorized under other forms of intellectual property protection, such as copyright law. Most companies have at least some trade secrets that must be shielded from competitors. This can include information such as customer lists, ideas for a new product or service, or plans to launch a product. A business generally attempts to protect its trade secrets from a variety of individuals including: (i) those who gain access through illegal means, (ii) those who initially had rightful access to the information, such as employees, (iii) those who discover the information unintentionally, and (iv) those who are bound by a valid agreement with the entity to maintain a trade secret.
Trade secrets are generally kept secret through the execution of a confidentiality agreement. A confidentiality agreement (sometimes referred to as a non-disclosure agreement or NDA) classifies which information should be treated as a trade secret, describes what constitutes a breach and outlines penalties for failure to maintain the confidentiality of the information. The remedy for the infringement of a trade secret agreement is typically monetary damages, which can be substantial if the non-breaching party can demonstrate significant financial losses from the leaking of protected information.
Contact Shane Coons at 949-333-0900 or visit his website at www.ShaneCoonsLaw.com to find out more about his practice.