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How To Protect Your Company’s Trade Secrets

Secrets of the trade are important for companies that want to stand out among their competitors. When a company develops a unique method for producing its products, company leaders need to implement best practices for protecting it from duplication by competitors. If you have questions about protecting your trade secrets from misappropriation, consider contacting an experienced New York intellectual property (IP) attorney at Schwab & Gasparini. Call the Syracuse office at (315) 422-1333, the Albany office at (518) 591-4664, or the White Plains and Hudson Valley office at (914) 304-4353 to schedule a consultation.

What Is a Trade Secret and Why Protect It?

The Defend Trade Secrets Act (DTSA) of 2016 was enacted to help companies have additional options to combat misappropriation of trade secrets. According to the American Bar Association, the DTSA uniformly defines “trade secrets” and “misappropriation” where these terms may have varying definitions across the states. A trade secret is generally defined as information related to a technique or device that a company uses to produce its products. That information must have been kept secret using reasonable measures and must possess at least potential economic value independent of the products from not being publicly known. 

Misappropriation of trade secrets happens when a person, knowingly or with reason to have known, improperly acquires a company’s trade secret. Disclosing or using a trade secret without express or implied permission from the owner also constitutes misappropriation.

Best Practices for Protecting Company Trade Secrets 

Protecting company trade secrets from both external threats and potential thieves that are already present inside the company can be essential for maintaining the company’s competitive advantage. A knowledgeable IP attorney from Schwab & Gasparini may be able to help determine which reasonable steps your company can take to begin or continue protecting your company’s trade secrets.

Implement Business Procedures To Supplement Non-disclosure Agreements

Confidentiality and non-disclosure agreements between business partners or with employees constitute a first line of defense against leaks of a company’s trade secrets. However, implementing certain business procedures will enforce the agreements and create a stronger case in misappropriation claims. These policies and procedures may include requiring employees to return confidential information when they plan to leave the company, making sure all documents are marked “confidential,” or prohibiting any one employee or outside party from having full access to the sensitive information that comprises the company’s trade secret.

Control Physical and Electronic Access

According to the American Bar Association, one of the best practices for protecting a company’s trade secrets is to only share that information with those who need to know. Those who are not on a need-to-know basis should not have access. Companies can better protect their trade secrets by implementing strong physical and electronic security measures. Whether with keycards for building or room entry or with passcodes for system use, companies can restrict access to their trade secrets. After these measures have been put in place, it is important to regularly evaluate and update as needed. 

Identify, Assess, and Manage Risks

To protect a company’s trade secrets, first identify and set apart the information that needs to be protected. Next, assess the risks. What is most at risk of security breaches or leaks? Is one department more vulnerable than the others? After completing the assessment, take additional steps as required to manage those risks in the most critical areas.

Create Supply Chain Procedures and Plans

Third parties who have access to a company’s trade secrets for product development, manufacturing, or collaborating will need to sign third-party non-disclosure agreements. Companies can additionally protect their intellectual property from these outside parties by regularly reviewing the plans and procedures they have put in place and by clearly communicating their expectations for protecting their confidential information.

Conduct Employee and Vendor Training

To further protect your company’s trade secrets, conduct training sessions for employees and vendors who will have access to proprietary information. Both groups need to be aware of what the protected information is and what is expected of them in relation to the information. Failing to inform employees and relevant third parties what the company considers to be confidential may lead to the dismissal of a misappropriation case.

Build a Trade Secret Protection Team

One of the best practices for protecting a company’s trade secrets is to assign an individual or a team to enforce the policies and procedures. When a company’s confidential information and trade secrets are guarded by an individual or group with the responsibility of ensuring that the trade secret protection policies are being followed, that company will have a better standing against potential misappropriation.

Make Continual Improvements

As the business grows and technology changes, it is important to revisit the policies and protections put in place against misappropriation of trade secrets. What may have been enough in the past may need to be upgraded due to changes in laws, available technology, and current business needs.

What Remedies Are Available for the Misappropriation of Trade Secrets?

If an employee or other trusted individual has used or disclosed a trade secret that was fraudulently or improperly acquired, a court may impose certain remedies or penalties on behalf of the company. These include:

• Injunctive relief: The court may order the defendant to cease violating the company’s rights and work to preserve the secrecy of the company’s information 
• Damages: The court may require a defendant to pay monetary damages to the company if the judge determines that there was economic harm resulting from a trade secret violation. These damages can include the company’s losses and the defendant’s profits as applicable. In extreme cases, punitive damages may also be awarded

What Protection Does the DTSA Provide for Disclosure of Trade Secrets in New York?

According to the New York State Bar Association, the DTSA provides additional options for companies, including the opportunity to file in federal court. While ex parte seizure under the DTSA may not offer as much flexibility to litigants as New York state laws, the DTSA’s removal of the “in use” requirement as compared to New York’s definition of trade secrets offers additional protections. This difference allows companies to protect trade secrets that may not currently be in use. In addition, the DTSA offers the opportunity for the parties to claim attorney fees if either the defendant appropriated the trade secret willfully and maliciously or the plaintiff filed the claim in bad faith.

What Is the “Inevitable Disclosure” Doctrine

Using the “inevitable disclosure” doctrine, a company that has filed a trade secrets claim can establish a threat of misappropriation versus actual misappropriation. The plaintiff (company) must show that the defendant (previous employee who knew the company’s trade secrets) obtained new employment that would inevitably lead to a reliance on the company’s trade secrets.

Protect Your Trade Secrets in New York With Help From an IP Attorney

Protecting company trade secrets means safeguarding a company’s growth and profit margin by ensuring that it can stand out among its competitors. Even with proper protections in place, however, bad actors may use or disclose improperly obtained confidential information. When that happens, the company may need to file a claim for available remedies through the court. To learn more about how to protect your company’s trade secrets, consider contacting an experienced New York intellectual property attorney at Schwab & Gasparini. Schedule your initial consultation by calling the Syracuse office at (315) 422-1333, the Albany office at (518) 591-4664, or the White Plains and Hudson Valley office at (914) 304-4353.

Sun Jun 9 2024, 12:00am