Trade secrets offer startup founders an affordable mechanism to protect confidential information, but only if they’re carefully managed. With trade secret protection, maintenance of your ‘secret sauce’ relies strongly on robust legal agreements and operational protections. In this blog post, we’ll outline 5 must dos for companies with trade secrets.
1. Limit Access to Trade Secrets.
As the saying goes: an ounce of prevention is better than a pound of cure. This is true of trade secret protection too. Trade secrets are only afforded protection if the holder takes reasonable steps to protect their secrecy. Accordingly, keep an inventory of information you consider your trade secrets and strictly limit the number of people to whom you provide details of these trade secrets. This reduces the risk of your trade secrets being exposed, while also reducing the number of legal documents you’ll need to protect the trade secret.
2. Have Employees Sign an NDA ASAP.
Employees, as well as contractors, investors, and business partners, should also be asked to sign a non-disclosure agreement (NDA) or similar contract including binding confidentiality provisions as early as possible in the relationship. In any event, this agreement should be in place before any trade secrets are shared with them.
Confidentiality provisions come in a range of forms, and the type of agreement best suited to protecting your intellectual property (IP) does vary depending on your unique circumstances. It’s best to speak with an attorney before bringing in contractors, employees, or partners so you can protect your trade secrets. Failing to do so can jeopardize your competitive edge and, once a trade secret is public, you can never get that edge back.
You can learn more about NDAs in our Conversations with CGL Podcast episode on the topic: https://cgl-llp.com/insights/protect-your-ideas-ndas/
3. Ensure Your Agreements are Binding and Practical.
An issue we see founders face is that the legal protections provided to them on paper don’t always function well in reality. Enforcing an NDA is expensive, and there are scenarios where the court may invalidate the NDA altogether. If the definition of ‘confidential information’ or other key terms are too expansive or onerous, for instance, the NDA may be invalidated. Consulting with an attorney at the outset can ensure that your agreements are comprehensive, but flexible enough to be effective in practice.
Additionally (and to reiterate point 1 above), protection of your trade secrets demands more than legal agreements. You should work with your attorney to develop practical protections, including limited access, strong company policies and practices, and employee training that covers appropriate use and protection of confidential information and IP.
4. Understand the Risk Remote Work Poses to Your IP.
Your company needs to understand and mitigate the risk remote workers pose to your IP. Remote work comes with the increased likelihood of your employees using unsecured networks or mixing personal and workplace use of devices. It is also more likely that additional users will have access to the workplace device as your employees may either loan the device to household members or work in their presence.
Company policies and practices and regular employee training can help reduce this risk. However, you should work with an attorney and your IT provider to develop appropriate cybersecurity measures to further protect your trade secrets.
5. Know What to do When an Employee Leaves.
When an employee leaves, whether voluntarily or following termination of their employment, you should:
- Remind them of their obligations to not disclose trade secrets.
- Collect all company devices and property from them as soon as possible.
- Store the device safely if you suspect they have misused trade secrets, so you can work with an IT specialist for collect evidence for any future litigation.
Protect Your Trade Secrets with CGL
Protecting your trade secrets involves a dynamic and multifaceted approach that works in the real world, not just on paper. CGL’s IP attorneys have extensive experience developing trade secret protection for startups and maturing companies.
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