Identifying and protecting trade secrets is a perplexing, but necessary, task for employers. Yet some employers may not understand what constitutes a trade secret, how trade secret is defined legally, what courts interpret as a misappropriation of trade secrets, or who to work with to protect them. Often, safeguarding trade secrets is not a key issue for them. They may feel that it is unnecessary to protect their proprietary information due to common misperceptions about trade secrets, or that only large corporations have to be concerned about them.
That is not the case, however. Safeguarding trade secrets is a concern for virtually all employers, ranging from those with one employee to multinational conglomerates.
Smart Business talked with Anne Marie Finch, a partner with Godwin Pappas Langley Ronquillo LLP, to learn more about how business owners can identify and safeguard their trade secrets and strengthen their competitive advantages, and how doing so can benefit them.
What constitutes a trade secret?
There is no clear-cut legal definition according to Texas law. There are only ‘factors to be considered.’ They include the extent to which the information is known outside the employer’s business and by employees and others involved in his business; the extent of measures taken by the employer to protect the secrecy of the information; the value of the information to the employer and his competitors; the amount of effort or money expended by the employer in developing the information; and the ease or difficulty with which the information could be properly acquired or duplicated by others.
Why should employers consult attorneys to safeguard their trade secrets?
Often, employers do not have a clear idea about the definition of a trade secret. The lack of a definition and the vagueness of the factors make it difficult for some employers to identify their trade secrets, let alone protect them. As a result, some employers try to protect things that really are not trade secrets and do not bother trying to protect the actual secrets.
Either strategy can be a waste of time and energy, unless the employers are focused enough to recognize the exact issue. Attorneys can help clients identify and protect their true trade secrets, and save them valuable time and money in the process.
How do attorneys help clients identify and safeguard their trade secrets?
In essence, they provide a plan for clients in the area of safeguarding their trade secrets. For example, they can develop appropriate confidentiality agreements that impress upon employees the seriousness of protecting trade secrets and the need for keeping such matters confidential even after they leave their employment.
Attorneys can identify areas in which courts have confirmed that a valid trade secret exists, refine those areas, advise clients on the appropriate methods for protecting their trade secrets, and devise strategies to prevent them from getting into the public domain.
It is important for employers to remember that if they have a trade secret and they do not safeguard it, once it gets into the public domain, it may lose its protection. If that happens, it is very difficult for employers to put the ‘egg’ back together.
In addition to the steps mentioned above, attorneys can help employers protect against trade secret espionage techniques such as computer hacking, software code-cracking and reverse engineering.
Do tactics such as trade secret espionage and reverse engineering affect multinational corporations more than they do small employers?
They can affect any employer, from a company with just one employee to an international conglomerate. As long as an employer has a trade secret that gives it a competitive advantage in its market, it can be susceptible to trade secret espionage and reverse engineering. That is a point that employers of all sizes should take into consideration when evaluating whether it is worth investing their time, effort and resources into identifying and protecting their trade secrets.
What are the most expeditious ways for employers to protect their trade secrets?
The most common safeguards can be found in the form of a properly drafted noncompete clause coupled with a confidentiality agreement, both of which are binding in Texas.
A noncompete agreement has to be reasonable in terms of geographic area and narrowly defined to balance the employer’s interests with the employee’s right to secure some type of livelihood. A confidentiality agreement is binding as long as the information the employer seeks to protect truly is confidential.
ANNE MARIE FINCH is a partner with Godwin Pappas Langley Ronquillo LLP in its Houston office. She is chair of the firm's Labor and Employment Section and vice-chair of its Intellectual Property Section. Reach her at firstname.lastname@example.org or (713) 425-7437.