Trade Secrets . . .
are all of a company’s proprietary know-how that
gives it an advantage in the marketplace. Different states define
trade secrets differently, but most state laws only protect trade
secrets that are not generally known to competitors and only when the
company takes actions to identify and protect them.
Unlike patents, which entitle the holder to preclude
others from using patented technologies, trade secrets protection
prevents others from using company technologies only by keeping them
secret. If others discover the company’s secrets by "reverse
engineering" or by developing the same secrets on their own, they
cannot be stopped from using the knowledge. Trade secrets protection
can prevent others from stealing company secrets, but only if the
company takes appropriate actions to prevent unauthorized disclosure
of its information.
Confidentiality and secrecy agreements with company
employees, owners, and consultants who have access to secrets are
common methods of protecting trade secrets. Investors who put money
into companies with valuable secrets usually require the companies to
enter into secrecy agreements with their employees. Some also require
management members to enter into secrecy and noncompete agreements
directly with the investors.
Confidentiality agreements alone will not protect
company secrets. Other measures must be taken to ensure the secrecy of
the information. These include limiting access to company secrets
(only those persons who need to know the secrets to perform their job
and who are bound by a secrecy agreement should have access), marking
secrets as confidential, and distinguishing between secrets and
nonsecrets. Material containing company secrets should be stored in a
safe place and destroyed when it is no longer needed so that it cannot
Trade secrecy laws vary from state to state. Some
states, for instance, distinguish between technical trade secrets and
non-technical confidential information, allowing a company to protect
nontechnical information only by contract and only for a limited
period of time. Some states require stricter definitions of technical
trade secrets than they do of nontechnical confidential information.
Others make no distinction at all. All prescribe definite limits to
the availability of trade secrecy protection.
Attempts to extend protection beyond these legal
limits, even if inadvertent, can jeopardize the trade secrecy
protection a company relies upon. This, coupled with the fact that
companies must comply with all of the conditions and requirements set
out by their state’s laws before they can claim trade secrecy
protection, makes it important for companies to have an experienced
professional review the precautions they take to protect their secrets
and to review the form of any secrecy agreements they use. See: