Trade Secrets

Definition: Information used by a business, which can be legally protected that is secret to the general public and is critical to the livelihood and success of a business

How a product is made or ingredients that go into it, even customer lists, can be protected as a trade secret. Source codes for computer programs and the formula for Coca-Cola® are common examples. The critical requirement for trade secret protection lies in maintaining the secret. Methods or information revealed to the public cannot be protected under trade secret laws.

As is the case with computer crime, protecting your trade secrets and other proprietary information is largely a matter of common sense. The first thing to do is identify your trade secrets. These include any information you use to operate your business that you consider valuable enough--and secret enough--to give you an edge over your competition. Trade secrets can be product designs, customer lists, sales forecasts and many other types of data.

Once you've conducted an audit of your trade secrets, you need to set up policies to protect them. These can consist of the following:

  • Make sure everyone who sees your secret information is aware that it is secret. Notify partners, customers, suppliers and employees exposed to proprietary secrets that the material is confidential. Get them to agree not to use it against you or to disclose it to anyone without your written permission. Get this in writing; and have them sign these nondisclosure agreements. Stamp documents "Confidential."

  • Enforce physical security. Put up "No Trespassing" signs, erect fences, lock entrances and exits, and hire security guards. Lock your secrets up.

  • Use employee and visitor identification badges to control access to your business. Establish rules requiring people to sign sensitive documents in and out.

  • Set up passwords. Use them to access computers, copiers, fax machines and other machines that could be used to copy or transmit secrets.

  • When employees leave, take measures to ensure that secrets don't leave with them. Collect sensitive materials from the offices of terminated employees before allowing them to return to their desks. And before they go, remind them of the nondisclosure documents they signed.
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