If you are a successful business owner, you’ve likely worked long hours over a long period to establish the best practices that are essential to your success. Many of those best practices are also “trade secrets” that need to be protected. Don’t let an employee walk off the job and walk off with your hard-earned trade secrets. Make sure your business—and its trade secrets—are protected.
What is a trade secret?
A trade secret sets your business apart from your competitors. It might be your client lists, software, product recipes or formulas, business processes, pricing lists, or training techniques—proprietary information your business uses to its commercial advantage. Generally speaking, the information:
is secret—it is not generally known or accessible
has commercial value because it is secret
is kept secret through reasonable steps taken by the business
Unlike patented inventions, trade secrets need not be formally registered with a government agency to be protected. But your business’s policies and procedures must clearly demonstrate that the trade secrets are, in fact, trade secrets.
How can I protect my business’s trade secrets?
1. Non-Compete Agreements
A non-compete agreement places restrictions on employees when they leave an employer, which may provide some trade-secret protection. Many states will uphold a non-compete agreement found in an employment agreement. The non-compete agreement limits on an employee’s ability to move from employer to employer by restricting future employment geographically, by time, and by industry. This type of agreement prevents your employee for going to work for your competitor or starting their own business down the street—at least for a certain amount of time.
If you’re in a state that recognizes a non-compete agreement, this will provide some trade-secret protection. California is one state that does not typically uphold non-compete agreements.
2. Non-Disclosure Agreements
Whether it’s a free-standing agreement or part of an overall employment agreement, an employer can use non-disclosure provisions to protect its trade secrets. Basically, a non-disclosure agreement (NDA) is a legally enforceable contract that establishes a confidential relationship between someone who holds secret information (in this case, the employer) and a person who receives that secret information (in this case, the employee).
If you want to put an NDA in place with existing employees, you should consider offering something of value in exchange for their signature on the contract so that there is an exchange of “consideration” (something of value).
Note that the act of requiring your employees sign an NDA also demonstrates that the business has taken reasonable steps toward protecting its trade secrets (which is an essential element of establishing a trade secret in the first place).
3. Uniform Trade Secrets Act
Although using an NDA is a first line of defense, state laws offer some additional protection to employers and their trade secrets. Most states, including California, have adopted the Uniform Trade Secrets Act. California’s trade secret laws are found in Cal. Civ. Code Secs.3426 et seq. An employer can sue under this act to stop an employee from disclosing trade secrets and, in some cases, to obtain financial damages.
Don’t lose your competitive edge by losing control of your trade secrets. As a full-service business law firm, Attorney Christopher Glenn Beckom conducts comprehensive business reviews—and recommend updates as needed— to ensure his clients’ business policies and procedures, employment agreements, and NDAs maximize the protection available for trade secrets. Call our offices at 800-581-7030 for exceptional legal guidance.
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