Safeguarding Trade Secrets

A trade secret is strictly confidential information. Once the information is disclosed to persons without a duty of confidentiality, it loses its trade secret status.

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What are Trade Secrets?

Trade secrets are the commercial secrets that have value to a business, including for example, formulas, designs, systems, customer contacts, marketing plans/data, and engineered products that cannot be reverse engineered. To be a trade secret, the information needs to be known only to a limited group of persons having a duty of confidentiality and be subjected to strict measures to ensure the confidentiality of those secrets.

Types of trade secrets

There are several types of trade secrets a business can possess. Below is a list of those most common:

  • A business’ marketing plans and data are often very well guarded by a business’ executives and staff.
  • Secret formulae including the development of new products, processes and plans aimed at a business’ financial expansion.
  • Manufacturing techniques and product designs including the processes and materials with which a product is manufactured.

Protocols within a business to safeguard trade secrets are required for proof of the existence of a trade secret.

One of the most well-known examples of a trade secret is the recipe for Coca-Cola.

How do you safeguard trade secrets?

It is essential that strict efforts are made by that business to protect the trade secrets. It is always recommended that a business seek the advice of an experienced IP lawyer to assist in identifying and safeguarding the trade secrets. In addition, there are processes a business can adopt to ensure that their trade secrets maintain their trade secret status. Failure to maintain trade secret strictly designed protocols can easily cause them to lose their trade secret status.  Protocols may include:

  • Identify and catalogue trade secrets of a business, and measures to ensure their trade secret status.
  • Ensure that trade secrets are saved and stored (either digitally or physically) in a way that ensure that only the people that have permission to access the trade secrets can access the trade secrets and labelling those documents or files as confidential.
  • Train employees regularly on how to handle trade secrets appropriately
  • Limit access to trade secrets, and only allowing employees who are subject to confidentiality requirements and who require that knowledge to perform their jobs to access the trade secrets.
  • Ensure that anyone who has access to your business’ trade secrets has signed a non-disclosure agreement (NDA), acknowledging that they will strictly maintain the secrecy of those trade secrets and that there are substantial remedies for breach of the NDA.
  • Ensure that employees who are leaving your business are covered by confidentiality agreements and that they return or destroy trade secrets in their possession before their departure. You should also document that those employees are made aware of their ongoing obligation to maintain trade secrets after they depart.
  • If any third party that your business engages with has access to your trade secrets, requiring the third party to sign a confidentiality agreement.

Employment Contract Terms Safeguarding Trade Secrets

Restraint of Trade terms in employment contracts with severe remedies can avoid leakage of trade secrets by former employees. As long as the former employer uses strict measures to maintain its trade secrets, it can have a cause of action against a former employee who divulges a trade secret to a future employer.

Safeguarding your business’ IP

Coulter Legal provides strategic IP services to small, medium, and large businesses, from identification and capture, through to management, commercialisation and enforcement of your IP rights.

Our Intellectual Property expertise spans across areas such as copyright, design rights, trade marks, patents and other intangible assets and IP rights including confidentiality, trade secrets, and domain names.

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