Protecting Your Trade Secrets

By: Atty. Gabriel Cosh

Trade secrets means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

However, in order to protect your trade secret, you must first know what information qualify as trade secrets. Trade secrets generally fall into two categories:

1. Technical information; and
2. Business information.

Trade secrets which are under the category of technical information may include: (1) Plans, designs and patterns, such as those for specialized equipment; (2) Processes and formulas; (3) Methods and techniques for manufacturing; (4) Engineering notebooks; and even (5) Negative information which means designs that did not work.

On the other hand, trade secrets which are under the category of business information may include the following: (1) Financial information prior to public release; (2) Cost and pricing information; (3) Manufacturing information; (4) Internal market analyses or forecasts; (5) Customer lists; and even (6) Personnel information of the corporation and it’s employees.

Please remember that the above are just sample information that may be considered as trade secrets. The actual test is if your information has all the four elements to be considered as a trade secret.

Being a valuable intellectual asset, the owner of a trade secret is duty bound to use reasonable measures to protect the secrecy of the trade secret. Generally, an owner of the trade secret must execute a confidentiality agreement involving its employees, contractors, vendors and other personnel. The confidentiality agreement will assure the owner that the named parties have knowledge of the existence of the secret information and is duty bound not to disclosure it.

Putting of warning signs and labels on confidential documents and any machines containing confidential information is another way of protecting your trade secrets.

If, on the other hand, it is not possible for a non-disclosure or confidentiality agreement to be executed to protect your trade secret, it is enough that you should state unequivocally that certain information, in the course of your business relationship is confidential and should not be disclosed. Otherwise, you are determined to pursue claims for damages as a result of disclosure of your trade secret.

Remember, over expensive or unreasonable means in protecting your trade secret is not mandated for your information to be considered and treated as trade secret under California law. It is enough that you use reasonable measure, by means of ordinary diligence to protect your trade secret.


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