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Trade Secret Protection Methods

Aggressive protection of trade secrets is necessary to prevent intentional or unintentional disclosure. In addition, one of the key factors in determining whether something constitutes a trade secret is the extent of the efforts to keep it secret. Companies protect trade secrets through physical measures and written agreements.

Physical measures  There are a number of physical measures firms use to protect trade secrets, from security fences around buildings, to providing employees access to file cabinets that lock, to much more elaborate measures. The level of protection depends on the nature of the trade secret. For example, although a retail store may consider its inventory control procedures to be a trade secret, it may not consider this information vital and may take appropriate yet not extreme measures to protect the information. In contrast, a biotech firm may be on the cusp of discovering a cure for a disease and may take extreme measures to protect the confidentiality of the work being conducted in its laboratories.

   The following are examples of commonly used physical measures for protecting trade secrets:

  • Restricting access: Many companies restrict physical access to confidential material to only the employees who have a “need to know.” For example, access to a company’s customer list may be restricted to key personnel in the marketing department.
  • Labeling documents: Sensitive documents should be stamped or labeled “confidential,” “proprietary,” “restricted,” or “secret.” If possible, these documents should be secured when not in use. Such labeling should be restricted to particularly sensitive documents. If everything is labeled “confidential,” there is a risk that employees will soon lose their ability to distinguish between slightly and highly confidential material.
  • Password protecting confidential computer files: Providing employees with clearance to view confidential information by using secure passwords can restrict information on a company’s computer network, Website, or intranet. Companies can also write protect documents to ensure that employees can read but not modify certain documents.
  • Maintaining logbooks for visitors: Visitors can be denied access to confidential information by asking them to sign in when they arrive at a company facility, wear name badges that identify them as visitors, and always be accompanied by a company employee.
  • Maintain logbooks for access to sensitive material: Many companies maintain logbooks for sensitive material and make their employees “check out” and “check in” the material.
  • Maintaining adequate overall security measures: Commonsense measures are also helpful. Shredders should be provided to destroy documents as appropriate. Employees who have access to confidential material should have desks and cabinets that can be locked and secured. Alarms, security systems, and security personnel should be used to protect a firm’s premises.

Some of these measures may seem extreme. However, unfortunately we live in a world that is not perfect, and companies need to safeguard their information against both inadvertent disclosure and outright theft. Steps such as shredding documents may seem like overkill at first glance but may be very important in ultimately protecting trade secrets. Believe it or not, there have been a number of cases in which companies have caught competitors literally going through the trash bins behind their buildings looking for confidential information.

Written Agreements  It is important for a company’s employees to know that it is their duty to keep trade secrets and other forms of confidential information secret. For the best protection, a firm should ask its employees to sign nondisclosure and noncompete agreements.

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