Trade secrets are protected under both federal and state laws. The Defend Trade Secrets
Act of 2016 (DTSA) allows U.S. companies to protect against and remedy misappropriation of
trade secrets in federal court.

Identifying and protecting trade secrets can be crucial to the success of a business. A trade secret is information, formulae, patterns, compilations, programs, devices, methods, techniques, or processes that have economic value because they are not generally known by others. Unlike patents, trademarks, and copyrights, trade secrets are not protected by applying for registration with a government or state office. Rather, to protect trade secrets, a business should implement certain processes and procedures to protect these assets from public disclosure. Without a comprehensive trade secret strategy, trade secret owners risk the loss of protection over these assets. Below are a few tips on how to protect trade secrets.

Identify What What Materials or Information Need to Be Protected 

As noted above, a trade secret is information, formulae, patterns, compilations, programs, devices, methods, techniques, or processes that have economic value because they are not generally known by others. In order to determine which assets may warrant trade secret protection, it may be helpful to first look at the nature of the business or industry. Those assets that provide the business with commercial value and give the company a competitive advantage against competitors may warrant trade secret protection. Examples of trade secrets include recipes or formulas, marketing strategies, manufacturing techniques, and surveying methods.

Understand Your Protections Under Trade Secret Law 

The Defend Trade Secrets Act of 2016 (DTSA) defines trade secret misappropriation as follows:

1. Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

2. Disclosure or use of a trade secret of another without express or implied consent by a person who:
   • Used improper means to acquire knowledge of the trade secret;
   • At the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was:
     • Derived from or through a person who had used improper means to acquire the trade secret;
     • Acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or
     • Derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or

3. Before a material change of the position of the person, knew or had reason to know that:
   • The trade secret was a trade secret; and
   • Knowledge of the trade secret had been acquired by accident or mistake.

If your trade secrets are the subject of theft and a court determines that reasonable precautions to preserve them were not taken, any rights that may have existed may be lost. 

Properly Label Materials That Are Considered Trade Secrets 

Materials that are considered trade secrets should be properly and clearly labeled as such. For example, documents containing or reflecting trade secret information should have a “confidential” label on them. Team members can immediately identify the trade secrets if there is clear labeling of confidential documents and materials. As a result, there may be a lower likelihood of accidental exposure or internal theft. 

Set Up Employee Training and Policies Around Trade Secrets

All employees who may have access to trade secrets should participate in training related to the handling of these confidential materials. Employees should also sign a non-disclosure agreement (NDA).

Setting up employee training and policies can help protect against unauthorized disclosure of trade secrets. Employees who are aware of the importance of trade secrets may be more inclined to treat them with care and consider the repercussions of misusing them. 

Mishandled information should be quickly addressed the return of any trade secret materials should be required upon departure by an employee with a reminder of their obligations under their non-disclosure agreement. 

Utilize Non-Disclosure Agreements 

A non-disclosure agreement (NDA) is a contractual agreement between parties that outlines the terms and conditions under which confidential information, including trade secrets, can be shared. Nondisclosure agreements serve as enforceable contracts that help protect trade secrets and sensitive information by specifying the parameters of each party’s obligation to maintain secrecy. Non-disclosure agreements can be vital in preserving trade secret rights.

To effectively safeguard trade secrets, there must be clarity. In a non-disclosure agreement, you must specifically state the information that must be kept confidential. By signing a non-disclosure agreement, the receiving party commits to legal obligations regarding the confidentiality of the trade secrets. NDAs are very effective because violating an NDA can lead to legal consequences, including damages and injunctive relief. Furthermore, having a signed NDA on file may help the disclosing party’s case in court when there is a legal dispute over the trade secret misappropriation. It acts as confirmation that the recipient understands their duty to maintain confidentiality.

Consult With a Trade Secret Attorney to Help Protect Your Trade Secrets

The theft or misappropriation of trade secrets can be a serious legal and financial risk for businesses, and companies must take appropriate measures to safeguard their confidential information. Our trade secrets practice includes counsel, strategy, enforcement, and defense. 

Book a meeting with one of our New York City Trade Secret Lawyers.