PROTECTING TRADE SECRETS AND
CONFIDENTIAL, PROPRIETARY BUSINESS INFORMATION
Many companies are unaware that their business information may constitute trade secrets entitled to broad protection under the law. A company does not need a copyright, trademark or patent to protect such information. The primary considerations are that the information is proprietary and that the information is maintained in a private format and is sufficiently valuable and secret to afford the business a competitive advantage over others. No novelty or invention is required.
Courts have considered a number of factors in determining whether a trade secret exists that justifies protection under the law. The first requirement is that the information is known only within the company. This does not mean that the information cannot be available to the public or even commonly known the public, but if the design, process, formula, operation or other combination affords the business a competitive advantage over others, you can prevent an employee from using that information when they have left the company.
Courts also look to the efforts that a company uses to keep information guarded from disclosure. We often recommend that clients can enhance trade secret protection by following these steps: maintain a Trade Secret And Confidentiality policy; keep trade secret and proprietary information in binders clearly marked "confidential"; stamp highly sensitive information with a legend "confidential"; restrict access to the information, even within the company, so that employees who do not need to know the information in order to perform their job are prevented from obtaining trade secrets; keep doors and cabinets locked to restrict unauthorized access; and enforce the employment policies vigorously.
It makes a big difference to a court being asked to enforce a trade secrets/confidentiality policy, that the employer took great measures to make sure that the information and materials did not fall into the wrong hands.
Another factor considered by the courts is whether the information truly gives the company a competitive advantage. If your salespersons use a resource that is publicly available in libraries across the Nation, the source itself is not protectable. However, if you teach your employees a process for culling through thousands of prospects to locate those particularly valuable to your business, then the process that you have taught your employees may be a trade secret in and of itself. Of course, the more proprietary your information, the more valuable it will probably be to the company and the more value a court will assign to it. Consider, also, that if you do not treat material as valuable (in other words, by telling anyone who will listen), then the information will not likely be assigned a significant value.
Finally, courts consider whether the information was expensive and difficult to develop, as well as the ease with which it could be recreated or acquired by others. Therefore, I would make it clear to employees that you have spent a great deal of time assembling, collecting and processing trade secret information, including training materials, sales materials, customer and prospect lists, etc.
In Illinois, we have adopted the Uniform Trade Secrets Act, which provides civil remedies for trade secret misappropriation. These remedies include injunctions to prohibit others from using the information, damage awards, etc.
Businesses should consider the following steps to protect confidential information, in consultation with legal counsel to prepare the most advantageous approach:
1. Consider whether background checks for your employees are necessary, particularly where those employees have access to your most vital information;
2. Make sure that you educate employees about confidential trade secret information, the protection of that information, and the company=s policies of vigorously enforcing trade secret misappropriation;
3. Prepare a confidentiality policy and make sure that employees who do not sign an Employment Agreement containing a confidentiality and non-disclosure and non-compete agreement, sign the policy and return a copy to you for their file;
4. Review all information to make sure that it is marked appropriately;
5. Password computers containing protected files;
6. Ensure that persons with home offices have protection on their computers and for their documents when utilized outside of the office;
7. Set a good example. Talking about trade secrets in an elevator or in a restaurant where there is no protection of privacy shows that the company has a haphazard manner of treating trade secrets and confidential information.
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The time to think about protecting confidential, proprietary information is NOW....not after you've just learned that an employee has left and taken your trade secrets to a competitor. If you believe that your proprietary information is deserving of protection, it probably is! Taking action early can save significant costs later.
If you would like more information about trade secrets, trade secret litigation, confidentiality and non-competition employment policies, and protecting your confidential information, or if you would like a copy of the Illinois Uniform Trade Secrets Act, call Marc Sherman at 847-674-8756 or request a copy by e-mail to marc@mshermanlawoffice.com