Is that really a secret? Featured

9:37am EDT July 22, 2002

As the work force grows more mobile and businesses rely more on the knowledge and skill of workers, intellectual property and trade secrets law is becoming a contentious area of the law.

The problem with many of these cases is that it is often difficult to determine what constitutes a trade secret. A trade secret is essentially some parcel of information that provides a competitive advantage and is not readily available to those outside the company. The formula for Coca-Cola, for instance, would be an example of a bona fide trade secret.

Tom Shumaker, an intellectual property attorney with Pittsburgh-based law firm Tucker Arensberg, recalls a classic case from the 1960s that involved a milkman who left one company, went to work for another milk delivery business and immediately started to contact his old customers to drum up business. His former employer took him to court, claiming he was using proprietary knowledge to the advantage of his new employer.

The judge ruled in favor of the milkman, pointing out that anyone could have easily figured out who the milkman's customers were simply by following him on his route.

There are exceptions, but generally, if customer lists can be assembled from conventional sources readily available to anyone, such as from telephone, industry or business directories, or, as in the case of the milkman, by observing them in the normal conduct of their business, they're unlikely to be considered trade secrets.

But some cases aren't that easy to sort out. James Cotter, a law professor at the University of Florida and an expert in trade secret law, says if the know-how an employee has is specific to a particular company -- knowledge of a proprietary process or some aspect of a business plan, for instance -- it may be construed as a trade secret. In other cases, though, an employee's industry knowledge, however valuable to a company or its competitors, may not be a trade secret.

Cotter suggests employers do a couple of things to protect their trade secrets. Upon hiring employees who will have access to trade secrets, employees could be required to enter into restrictive covenants that prevent them from working in the same industry for a specified period of time and within a defined geographic area after they leave the company. In exit interviews, employers should remind departing employees of any confidentiality agreements that are in force.

In any case, a little preparation and caution can go a long way toward avoiding grief.

Says Shumaker, "What this really falls under is the general, but often ignored, expression of an ounce of prevention ... "Ray Marano