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Trade secrets include formulas, patterns, devices, or compilations of data that give a competitive advantage in business.

Unlike patents, trademarks and copyrights, which primarily involve federal law, trade secrets are governed by state law.

Another difference is that no registration is required so long as the information to be protected is intrinsically valuable and reasonable steps are taken to preserve its secrecy. Essentially, trade secrets are a type of “do it yourself” intellectual property protection.

The Label “Trade Secret” Isn’t Enough

Small business owners should consider trade secret protections for any valuable information that is not otherwise known (or available to) competitors.

This information can be specific technical information about existing products, beta-testing, or prototype concepts for new products, sensitive business information regarding marketing and customer lists, as well as financial information such as costs and pricing.

For this type of information that is vital to your business’ success, you’ll want to make sure you take the necessary steps to safeguard it.

Preventing Unauthorized Use of Proprietary Information

The owner of a trade secret is entitled to prevent unauthorized use or disclosure of the information contained in the trade secret.

This means a business can require its employees and contractors (as well as vendors or suppliers and prospective business partners) to sign confidentiality agreements regarding trade secrets, and may enforce those agreements in court to prevent future use or disclosure and recover monetary damages.

How to Protect Trade Secrets

While there is no formal registration process, simply labeling something a “trade secret” is not enough to create an enforceable right to prevent its use or disclosure. The information to be protected must have some intrinsic value (i.e., it gives the business a competitive advantage).

In addition, the information must be secret. Information in the public domain, or which is readily available, does not qualify for trade secret protection. That means businesses must take commercially reasonable steps to preserve the secrecy of information that is claimed to be a trade secret.

Typically this involves internal practices such as limiting access, labeling items or information as “Confidential,” and using nondisclosure or confidentiality agreements to establish legal protections and restrictions for that information.

Business Consulting with James M. Hillas, P.C.

Protecting your proprietary information from competitors is beneficial to your business, from start-up trade secrets to confidential information that has allowed your business to maintain continued success.

James Hillas is an experienced business consultant, helping small businesses at all stages of development keep their competitive edge by protecting their trade secrets.

For expert legal advice for your business success, get in touch with James M. Hillas today!