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Trade Secrets 101: What Every Entrepreneur Should Know

Vol. 26 Issue 7

Post Categories: Law

Protecting your trade secrets is becoming more and more important for startups and small businesses. Here’s what you should know.

Unlike other forms of intellectual property, which are primarily protected through federal laws, trade secrets are primarily protected through state laws. That means every state maintains its own trade secret statutes. However, most of them share common elements, which is what we’ll dive into below.

What Constitutes a Trade Secret?

Generally speaking, a “trade secret” is information that (a) you reasonably attempt to maintain as confidential and (b) is valuable due to its confidential nature. Practically all kinds of information can be protected by trade secret laws, including technical data, nontechnical data, formulas, programs, methods, lists, presentations and more.

How Do You Protect Trade Secrets?

The key to protecting your trade secrets is to take reasonable actions to maintain the confidentiality of the information. Here are a few tips on how to do that:

»  Limit the number of people who have access to the information. You can do this with physical barriers such as walls, doors or even safes. For digital information, you can use passwords, firewalls and encryption.

»  “Stamp” the information as “CONFIDENTIAL,” although that isn’t a prerequisite for protection.

»  Most importantly, use nondisclosure agreements with everyone who has access to your confidential information—including employees, contractors, clients and others.

Unlike copyrights, trademarks and patents, there are no registration options for trade secrets.

Once you obtain trade secret rights, the protection will last for as long as you maintain the confidentiality of the information.

What Is “Misappropriation”?

Once you have a trade secret, you can prevent others from “misappropriating” your trade secret. That means you can prevent them from:

»  Acquiring your trade secret without your consent.

»  Using your trade secret without your consent.

»  Disclosing your trade secret without your consent.

Those rights are quite broad, and if someone is violating your rights, you may have the right to seek injunctive relief to stop them from continuing the violation. You may be entitled to actual monetary damages and sometimes punitive monetary damages.

Protection Is Key for KC Startups and Small Businesses

For most startups and small businesses, the most important thing you can do is be proactive about protecting the confidentiality of your trade secrets. If you have questions about your unique situation, you should contact an attorney that works on intellectual property matters.

This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult an attorney prior to making any legal decisions.