You may have heard the term “trade secrets” thrown around in the news thanks to the ongoing battle between makers of insulin pump products, but what does that term mean?  

What Is a Trade Secret?

In the U.S., a “trade secret” is basically any information not known to the general public that gives a business a competitive advantage and is protected by the business. That last part is crucial to the definition – a trade secret, in order to be protected by the courts in this country, MUST be protected by its owner.

One of the Most Famous Trade Secrets 

Proprietary information that a business accumulates or develops internally is all appropriate to be considered a trade secret that belongs to that business. Perhaps the most famous example of a trade secret is the original recipe for Coca-Cola Classic.  Developed in 1866 and not committed to paper until 1919, the precise mixture for the world’s most well-known beverage rests in its own vault today. Visitors to the company’s World of Coca-Cola in Atlanta can see The Vault of the Secret Formula, where the piece of paper from 1919 is stored securely. Reportedly, only two employees have access to this vault, making this example one of the gold standards of trade secret protection.

How to Protect Your Trade Secrets

While you do not need to have a “Vault of Secrets” at your own business, you DO need to take extra steps beyond just telling employees and those with whom you do business, “Don’t you tell anyone about our secrets.” There’s no set pathway or clearly defined set of standards that govern what a business must do in order to adequately protect its trade secrets. Indeed, such measures of protection can and do vary depending on the type of corporation, the industry and many other factors.  

Some trade secret protection pathways and remedies are state-specific, but there are also federal laws that protect trade secrets. In almost all instances, if you find yourself having to litigate your trade secrets in court, you will need to establish that you have taken adequate measures to protect the secrecy of the information at issue.  

So let’s look at some general precautions to get you thinking about what your business may do to protect its proprietary information.

General Precautions for Protecting Trade Secrets

Identifying and labeling information as “confidential” is almost always a good first step in trade secret protection, even for the smallest of businesses. Generally speaking, if you have information your business considers to be “secret” and pertains to your competitive edge (read: we’re not talking about keeping secrets from the IRS here!), having employees sign a Confidentiality or Non-Disclosure Agreement that specifically addresses such confidential information and how to treat it is an excellent start. This should be done at the earliest opportunity once you have identified information that your business considers to be proprietary and does not want disclosed to the general public.

Like with Coca-Cola, some trade secrets are simply reduced to paper. More frequently in today’s world, however, trade secrets can include detailed data and business plans or schematics of a new invention that must necessarily be stored electronically. Password protection with limited access to electronically stored information is the bare minimum that businesses can do to establish secrecy and protection.

In addition, it is generally advisable not to let employees remove sensitive information from the business’s property, either real estate (office) or cloud-based. This, plus the aforementioned Confidentiality Agreements can go a long way to establishing that you have adequately protected such information as a legally enforceable trade secret.

Talk to an IP Attorney

If you have questions about your particular business’s trade secrets, it’s always best to speak to an experienced intellectual property attorney. Aside from assisting you with drafting strong Confidentiality Agreements, your attorney will be best situated to fully advise you of your business’s specific needs when it comes to keeping your version of the Coca-Cola Classic secret recipe a secure trade secret. Sand, Sebolt and Wernow is an intellectual property law firm. We specialize in IP (intellectual property) litigation licensing, trade secrets, trademarks, patents, copyrights and foreign filings. Contact us.