Trade Secrets: Protecting One of Your Company’s Most Valuable Assets

When business owners think about intellectual property, patents, trademarks, and copyrights often come to mind. Yet for many businesses, their most valuable intellectual property is something else entirely: their trade secrets.

A trade secret can include a product formula, customer list, pricing strategy, manufacturing process, software source code, business plan, or virtually any confidential information that gives a business a competitive advantage because it is not generally known.

Unlike patents, trade secrets are not registered with the government. Their legal protection depends largely on one thing: keeping them secret.

What Is a Trade Secret?

Under both federal law and Colorado law, a trade secret generally is information that:

• Has independent economic value because it is not generally known or readily ascertainable by others; and
• Is the subject of reasonable efforts to maintain its secrecy.

Well-known examples of trade secrets include:

• The Coca-Cola formula
• Kentucky Fried Chicken’s blend of 11 herbs and spices
• WD-40 lubricant spray
• Google search algorithm
• Lena Blackburne Baseball Rubbing Mud (used to prep every ball used in Major League baseball games, taken from a secret location in New Jersey)

Trade secrets are not limited to large corporations, however. Businesses of every size—from startups to family-owned companies—often possess valuable confidential information that qualifies for protection.

Trade Secrets vs. Patents

People are generally familiar with a patent, which give its owner the exclusive right to make, use, or sell an invention for a limited period (generally 20 years from the filing date). In exchange, the inventor must publicly disclose how the invention works. Once the patent expires, anyone may use the invention. Generic versions of drugs are a well-known example.

Trade secrets work differently. There is no registration process and no expiration date. A trade secret may remain protected indefinitely—but only as long as it remains confidential.

Why Businesses Rely on Trade Secrets

Trade secret protection is particularly valuable when confidential information cannot easily be reverse engineered or independently developed by competitors. Common examples of trade secrets include:

• Customer and vendor lists
• Pricing strategies
• Sales methods
• Manufacturing techniques
• Software source code
• Product formulas
• Research and development
• Financial models
• Marketing plans

Unlike patents, trade secrets can potentially last forever, making them one of a company’s most valuable long-term assets.

Trade Secret Protection Under Colorado and Federal Law

Colorado has adopted the Uniform Trade Secrets Act (CUTSA), which provides businesses with legal remedies when trade secrets are improperly acquired, disclosed, or used. In addition, the federal Defend Trade Secrets Act of 2016 (DTSA) allows many trade secret disputes to be brought in federal court.

Depending on the circumstances, a business whose trade secrets have been misappropriated may seek:

• Court orders prohibiting further use or disclosure of the trade secret;
• Recovery of monetary damages for losses suffered;
• Recovery of the wrongdoer’s unjust enrichment;
• In cases involving willful or malicious misconduct, exemplary damages and, in some cases, attorneys’ fees.

These laws provide powerful remedies—but only if the information actually qualifies as a protected trade secret.

Why Protection Is Essential

Simply labeling information as “confidential” is not enough. To obtain legal protection, a business generally must demonstrate that it took reasonable steps to keep the information secret. If it fails to do so, the information may lose its status as a trade secret, leaving competitors free to use it.

Practical Steps to Protect Trade Secrets

Every business should take reasonable measures to protect its confidential information. Good practices include:

• Identifying information that qualifies as trade secrets.
• Limiting access to employees and contractors with a legitimate business need.
• Requiring employees, contractors, vendors, and business partners to sign confidentiality or non-disclosure agreements (NDAs).
• Including confidentiality and intellectual property provisions in employment and contractor agreements.
• Using passwords, encryption, and access controls for electronic information.
• Marking confidential documents appropriately.
• Training employees on handling confidential information.
• Conducting exit interviews reminding departing personnel of their continuing confidentiality obligations.
• Regularly reviewing and updating policies for protecting sensitive business information.

These measures not only reduce the risk of disclosure but also help establish that the company made the reasonable efforts required under Colorado and federal law.

Don’t Wait Until It’s Too Late

Trade secret protection is proactive, not reactive. Once confidential information becomes public, it often cannot be made secret again.

An experienced Colorado business attorney can help identify your company’s trade secrets, prepare confidentiality agreements, review employment and contractor agreements, implement effective protection policies, and pursue legal remedies if confidential information is misappropriated.

By taking reasonable steps today, your business can better protect one of its most valuable assets and preserve its competitive advantage for years to come. If you have questions, please reach out to Mark Spitz at Spitz Legal Counsel at mark@spitzlegalcounsel.com