Column: It’s All in the Name, Part II: Protect Your Trade Secrets

By Susan Colman & Neil S. Ende

This is Part II of this article. Don’t miss Part I, on protecting trademarks and copyrights, by clicking here.

Service providers always have copycats and hackers lying in wait to steal intellectual property in the form of trade secrets. But they need to protect against legitimate means of exposing these as well.

A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives one an opportunity to obtain an advantage over competitors who do not know or use it.

Examples include technical and nontechnical data, plans, drawings, recipes, financial data, lists of customers and suppliers and software, which have economic value. Trade secrets can be used in conjunction with both patents and copyrights.

Trade secrets give you very powerful protection. At the same time, trade secrets are extremely vulnerable. If you own any trade secrets they must be kept secret or the protection will be lost. Once this cat is out of the bag, it is out forever. License agreements involving any trade secret material need not disclose the secret itself, but must identify that trade secrets exist in the subject matter of the license. Furthermore, the license must direct the licensee to take sufficient measures and safeguards to keep the trade secret actually secret.

Unless prohibited under contract or license, reverse engineering is a legitimate means to let the trade secret cat out of the bag, so contracts and licenses must be drafted with care. Nevertheless, legal action can be brought for misappropriation of trade secrets. In such a case, you would have to prove three elements: 1., relative secrecy (e.g., that you have taken reasonable steps to protect your proprietary rights in the trade secret); 2., the trade secret’s value to you; and 3., novelty of the trade secret (although a unique combination of generally known information, or even data in the public domain, still can constitute a trade secret).

The duration of a trade secret is as long as it is kept secret. Companies would do well to set up internal safeguards in addition to the external safeguards set forth in their licensing agreements. The only cost is that associated with maintaining the secrecy.

The best way to determine whether you have assets–e.g., intellectual property–that need to be protected is to have a qualified attorney perform an intellectual property audit. We know–when you hear the word “audit” you automatically assume the fetal position, begin to whimper and to envision long visits with nasty, boring accountants. In this case, however, the audit will help you protect your business and save you money.

The intellectual property audit also will help you identify whether your company name, product names, logos or slogans have trademark or service mark significance. The intellectual property audit also will investigate and examine whether your company has documents, software and the like that should be registered with the U.S. Copyright Office. Finally, the intellectual property audit also will help you consider whether you have developed anything that could be considered a trade secret, and how you should protect it.

Once the intellectual property audit is completed, you will be in a position to make an informed judgment as to which of your assets need to be protected and the most efficient and effective means of obtaining protection. Like many other things in life, a little care and attention now inevitably will pay substantial dividends later.

This is Part II of this article. Don’t miss Part I, on protecting trademarks and copyrights, by clicking here.

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