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Identifying and Protecting Your Trade Secrets
Throughout most of the last century, businesses customarily invested millions of dollars to develop and to safeguard trade secrets such as formulas, customer lists, and blueprints. Access to these precious and classified assets has often been limited to only those senior executives with a "need to know." Our courts have acknowledged that certain confidential business information is worthy of trade secret protection in order to encourage invention and innovation and to promote fair and ethical courses of business dealing.
The trade secrets of a company do not give that company a monopoly with respect to the use of the secret; rather, the law protects the company against the unauthorized use or unfair acquisition of the secret by a competitor.
Trade Secrets Defined
It is important to know that not all information that a company uses in its daily business is a trade secret which the courts will protect. What, then, is a trade secret worthy of court protection?
In Connecticut, as in most states, a trade secret is information which (1) is secret and which the company has taken steps to keep secret; (2) is not known outside the business; (3) is of value to the company in its trade or business; (4) is the subject of considerable time and money in development; and (5) would be difficult for a competitor to properly acquire or duplicate. Examples of trade secrets include formulas, patterns, compilation, programs, devices, methods, techniques, processes, drawings, cost data, and customer lists. With respect to customer lists, if the list could be easily obtained by going through the yellow pages or some other directory, then the customer list is not likely to be afforded trade secret status. Rather, if the list contains particular individuals who are contacts and who have been dealing with the company, then those names are more likely to be considered trade secrets.
Protecting Your Trade Secrets
The first and foremost action you must take to protect your trade secrets is to keep them a secret. Limit the number of individuals to whom access is given. Label those documents which you consider to be trade secrets with the tag "CONFIDENTIAL INFORMATION." Keep the secrets in a special area, under lock and key if necessary. And if you are giving out the information to potential customers or clients, make those individuals acknowledge that the information is a trade secret, its use will be limited, and the information will be returned when the need to use the information is concluded.
Agreements with Employees
Although Connecticut common law and statutory law prevent your employees from improperly using your trade secrets, to drive the point home and to identify what secrets you have which you wish to protect, you should require your employees to execute a Confidentiality, or Trade Secret, Agreement. These agreements typically identify what specific trade secrets, or classes of trade secrets, employees will be given access to and remind employees, not only that the secrets should be confidential during the course of their employment, but also that, should they leave the company, they must continue to maintain the secrecy after they leave and not use the secret information for their own or anyone else's benefit. The agreement should remind employees not only of their obligation but also of the fact that they face a claim for damages and injunctive relief should they fail to honor their obligations.
Covenants Not To Compete
The Trade Secret, or Confidentiality, Agreement should not be confused with a covenant not to compete and should not be tied to such a covenant. A covenant not to compete is used to protect an employer from an employee competing for business, customers, or employees after that employee has left the company for a specified period of time in a specified geographic area. Thus, while the covenant not to compete is limited in both time and geography, the trade secret agreement, and obligation, lasts so long as the company maintains the trade secret - in the case of Coca-Cola, for example, perhaps forever with its formula. Moreover, while the covenant not to compete must be supported by consideration, or a promise of a benefit from the company to the employee, the trade secret does not. We recommend, therefore, that you have both a trade secret agreement and a covenant not to compete. That way, there will be no confusion as to the obligations of an employee who leaves the company. We also recommend that you remind your employees of their obligations before they actually leave.
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