Consider this: Coca-Cola generates over $30 billion in revenue annually. Imagine that someone has a magic wand and makes all of Coke’s physical assets disappear, its office buildings, plants, distribution centers, etc. Even if that were to happen, Starbucks is still an extremely valuable company. Why?
For one thing, Coca-Cola’s logos are instantly recognizable. They speak to the products they serve, how they taste, and the environment in which they are served. You can close your eyes and envision the inside of one of their stores.
But perhaps more important is Coke’s most valuable asset, the recipe for the syrup used in making it’s premier soft drink product. This recipe is known as a “trade secret.” Many companies, like Coca-Cola, have trade secrets. No matter how many recipes you may find on the internet, they don’t compare to what that company sells. Otherwise, people would stop going there. If you have a company, you likely have trade secrets. They could be algorithms, processes, recipes—anything that makes your business unique enough to generate profit. Your trade secrets are valuable, and they need to be protected.
What is a “Trade Secret”
Trade secrets are different from a trademark, such as “Coke” or McDonalds’ golden arches, which are words or symbols indicating the source of a product. There is a uniform trade secrets law that 47 states and the District of Columbia have adopted to help owners of trade secrets protect their intellectual property. That law defines a trade secret in the following way:
information, including a formula, pattern, compilation, program, device, method, technique, or process that:
- Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
- Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
As you can see, anyone can have something that qualifies as a trade secret, but they must take steps to protect it and keep it a secret.
Laws Regarding Your Trade Secrets
At first, you may cast this need aside because laws protect your intellectual property and trade secrets. And you’d be right; there are such laws. That doesn’t eliminate the need to have your own internal measures to prevent your guarded information from leaving the company. Companies must take reasonable steps to prevent others from stealing their information.
What if you sold one product? What would happen if the information regarding how to make that product left your company and was made public? You could very likely have legal options for recourse, but your company and potentially your revenue stream could be severely harmed.
Take Action
Take notice and account of your trade secrets. If they are stored digitally, audit your systems to see how secure they are. Depending on the size of your company, you may need to have physical security measures as well.
Secondly, take a look at your outside vendors. If your product is assembled, multiple vendors can create different components. Your attorney can even draft legal confidentiality agreements that your vendors must sign before working with you.
If vendors are external threats, your employees may be internal ones. Leaders who safeguard their property convey this to their employees. They can have them sign non-disclosure agreements and have pre-planned classes explaining the importance and consequences of keeping trade secrets internal. Limit physical access to those with a need to know the secret. Coca-Cola’s accountants don’t need access to its syrup recipe. Your HR managers don’t need access to your pricing formulas if you consider those a valuable trade secret. If an employee leaves, remind them of their non-disclosure interview during their exit interview.
Spitz Legal Counsel, LLC
Attorney Mark Spitz has over thirty years of legal experience, including fifteen years serving as in-house and general counsel. He has firsthand knowledge of the challenges businesses face and how an attorney can help them resolve these issues. To schedule your free consultation, contact Spitz Legal Counsel today.