Trade Secrets – Tips For Protecting Them

on March 13, 2014 by James Hunt

SFTH 11Most companies’ information portfolios consist primarily of trade secrets and it has been estimated that the yearly cost of trade secret misappropriation to U.S. companies ranges between $45 and $300 billion. As a result, trade secret litigation is on the rise and multi-million dollar verdicts are often the result.

The days of keeping trade secrets in hard-copy form are gone and digital or electronic storage has taken over. Cloud computing, which is providing information and/or services via digital networking, has allowed businesses easier access but it has also provided more opportunity for theft. This is especially true for companies that have numerous employees with access to trade secrets, especially since many employees change jobs several times throughout their career. In fact, many businesses are being forced to file lawsuits against former employees for alleged theft of confidential information in digital format.

Most state laws are based on the Uniform Trade Secrets Act (UTSA). The requirements for being eligible for protection as a trade secret under the UTSA include:

  • It must be secret, which means it is not public information nor readily ascertainable
  • Its secrecy is a factor in its independent economic value
  • It must be the subject of efforts that are reasonable under the circumstances to maintain its secrecy

It is predicted that the future of trade secret litigation will focus on whether it is “reasonable” to store trade secrets in the cloud and what security measures must be implemented to maintain the information’s secrecy.

Although the UTSA does not require absolute secrecy for trade secrets, businesses that maintain proprietary information in the cloud should immediately start considering how their data is stored and what is being done to protect it. This is true for internal networks and third-party data hosts. Companies should also train their employees on protecting trade secrets and policies for immediately restricting an employee’s access to confidential information when the individual resigns or is fired. Finally, companies should also include nondisclosure provisions in their employment agreements so exiting employees do not share or disclose trade secrets.
The attorneys at Slater, Tenaglia, Fritz & Hunt, P.A., provide clients with experienced legal representation.  We handle many types of business disputes on behalf of corporate clients, including Fortune 500 Corporations and individuals throughout New York, New Jersey, Pennsylvania and nationally. Our attorneys handle cases from pre-litigation negotiations through litigation to obtaining and enforcing judgments.  If you need assistance, or are interested in learning more, please contact us by phone at (201) 820-6001 in New Jersey or (212) 692-0200 in New York. We can also be found on Facebook, Linkedin, Twitter, Google+, Youtube and the Internet. All initial consultations are free of charge.