By Jeffrey L. Michelman
As a manufacturer, you will have “trade secrets.” But do you have a clear understanding of what is considered a trade secret?
Under Missouri law a trade secret can be any:
“… technical or non-technical data, a formula, pattern, compilation, program, device, method, technique or process that (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
Trade Secrets in Manufacturing
Typical trade secrets in manufacturing include tolerances, specifications, formulas, recipes, unusual applications for use of non-evident material, unusual combinations of materials or processing steps, use of non-evident devices, processes of manufacturing, drawings.
The remedies for misappropriation of trade secrets by others can include: getting an injunction against use and further disclosure; your actual losses attributed to the disclosure; reasonable royalty; attorneys’ fees; and punitive damages.
Where Are Your Trade Secrets Most at Risk?
The risk of losing your trade secrets in the manufacturing industry often comes from:
- Trading Partners:
- Suppliers, vendors, distributors;
- Joint ventures, strategic partnerships;
- International business ventures, outsourcing; and
- Employees through inadvertent disclosures:
- Allowing trade secrets to be taking data on mobile devices, collaborative technologies; and
- Departing employees taking the data with them.
As you can see, manufacturers’ trade secrets are exposed at many different points in the manufacturing and distribution process. But there are precautions you can take to risk your exposure.
Here are some of the best self-help measures:
- Identify your business’s trade secrets.
- Create an inventory to identify and define trade secrets.
- Have your attorney assist in delineating whether certain information fits the definition of a trade secret.
- Have counsel also create notices, labeling, markings for use on documents; use “Trade Secret” or “Confidential and Proprietary” labels to notify employees of the item’s secret status and what protective measures should be applied to this set of information.
- Maintain secrecy
- Employ restricted access physically and electronically, including physical locks, PINs, user codes, passwords, encryption, etc.
- Keep trade secrets off networks and servers.
- Work with IT Department to implement procedures.
- Manage and monitor your employees
- Require non-compete and confidentiality agreements.
- Conduct employee education programs covering non-disclosure and computer usage policies.
- Monitor employee email, computer and Internet usage.
- Do not allow employees to take restricted information outside of the office (laptops).
- Conduct exit interviews where you remind former employees of their continuing obligations and prepare a written contract for departing employees to sign.
- Divide and compartmentalize information if there are processes and techniques that employ a series of trade secrets to manufacture a final product.
- Use confidentially agreements suppliers and distributors
- Implement IP handling policies
- Monitor usage, access and distribution of trade secrets
- Test the security of your trade secrets – and be sure everyone knows they are being monitored
- How do your protection measures work in practice?
- What effort does it take to remove a secret from the company’s control?
- Can someone get to confidential information unchallenged?
- Have all persons who have access been properly trained or restricted?
Remember the importance of taking self-help measures. Trade secrets endure for as long as the information remains secret. Couple this with the judicial notice that owners of trade secrets cannot pursue any type of enforcement action if they have not taken adequate measures to protect the confidentiality of the trade secret at issue.
Posted by Attorney Jeffrey L. Michelman. Michelman represents clients in intellectual property and entertainment law matters. His practice involves the protection of intellectual property, trade secrets and “know how” and legal issues regarding E-commerce and social networking activities. Michelman’s entertainment law practice involves everything from endorsement, recording and appearance/reality TV contracts to movie/TV options to book deals.
06/20/12 12:02 PM
Filed under Business Law, Intellectual Property, Manufacturing and Distribution | Comments Off