Keep a Secret - Its the Law!

By: Laura Adams

Trade-secret law has become more important as our modern workforce has become more mobile. The law is necessary to protect the owners of proprietary company information.

A trade secret is company information you have that's not readily available to the general public. It's knowledge you've gained about what gives your company a competitive advantage over other businesses within the industry.

Anything that makes a company unique or that a competitor would find valuable in creating a competitive advantage may be considered a trade secret.

When changing employers, especially within the same industry, you need to give some thought to the trade secrets that you posses.

A trade secret can take on many different forms such as the following:

- Customer lists

- Product formulas

- Operational processes

- Sales techniques

- Pricing

- Software

To determine what is or is not a trade secret, the following criteria must be considered:

1. the extent to which the information is known outside the company

2. the amount of resources spent to create or develop the information

3. the ease of duplicating the information

4. the value of the information to the business owner and competitors

5. how much effort is made within the company to keep the information secret

Many employers ask employees to sign an agreement called a Non-Disclosure Agreement, or NDA, immediately upon hire. The purpose of these agreements is to inform workers about what is considered a trade secret within the business.

An NDA specifically restricts the disclosure or use of trade secrets during and after employment. But most U.S. states prohibit the misuse of trade secrets, even if you did not sign a Non-Disclosure Agreement.

Unauthorized use or disclosure of an employer's trade secrets is unlawful in most states during and after employment. So, even if you are fired from a job, you can not disclose your former employer's trade secrets to competitors or to a new employer.

If a former employer can prove that an ex-employee's new job will lead him or her to rely on their trade secrets, a court can enjoin the employee from working for a competitor for a limited period of time.

One example is the case of a former PepsiCo employee who was privy to confidential marketing plans for distribution and pricing of one of their drink products, All Sport. He went to work for Quaker Oaks, who sold Gatorade.

A court found that the former employee would have to rely on PepsiCo trade secrets and prohibited him from working at Quaker Oaks for 6 months.

The theft of trade secrets is a serious matter that carries the risk of civil as well as criminal penalties.

Under the Economic Espionage Act, an individual can be prosecuted under federal law with penalties of 15 years in prison and $500,000 in fines and restitution.


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