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trade secret program: BASIC PROTECTION

whispering manTrade secrecy measures take time, cost money and can result in aggravation. In some cases, these measures lower productivity and employee morale if workers perceive that the company is spying on them or maintaining a fortress mentality. Don’t adopt an overly ambitious security program that you’ll be unable or unwilling to follow. It is much better to have a modest security program that you and your employees will stick to than an extravagant one that will be ignored or resented.

Here are the minimum safeguards a small company (a start-up, particularly) should take to protect its trade secrets. Follow them and if you ever need to file a lawsuit to prevent someone from using or disclosing information in violation of an NDA, a judge would likely conclude that you took reasonable precautions to prevent the public or competitors from learning about your secrets.

As your company grows, you’ll want to implement some or all of the advanced secrecy measures discussed in Section D, below.

Use Nondisclosure Agreements

Before you give any person access to your trade secrets, make sure that he or she has signed a nondisclosure agreement. This is the single most important element of your trade secret protection program. 

Maintain Physical Security

Although employees or ex-employees, not industrial spies, most often misappropriate trade secrets, courts usually require that, in addition to using NDAs, a company take at least some reasonable steps to ensure the physical security of its trade secrets. At a minimum, a company should implement a “clean desk” and “locked file cabinets and desk drawers” policy. Documents containing trade secrets should not be left hanging about on desks when not in use; rather, they should be locked in desk drawers or filing cabinets. Your office should also be securely locked at the end of the day.

Increase Computer Security

Your computer system likely contains many trade secrets, such as financial records. It’s vital to take reasonable measures to prevent unauthorized people from gaining access to the system. Here are some of the security measures you can employ. Some of these measures may be too much of a hassle, particularly for small companies. By no means are all required. But the more you employ, the safer your trade secrets will be.

  • Use secret passwords, access procedures and firewalls to prevent trade secret theft from your company’s file server. Change the passwords periodically, especially when an employee who knows the current passwords quits or is fired.

  • Keep trade secrets in coded or encrypted form so outsiders can’t read them. Inexpensive encryption programs such as PGP (Pretty Good Privacy) are readily available.

  • Consider using separate computer systems, without Internet or other network access, for your most sensitive information.

  • If practical, place computers, terminals and other peripherals in a physically secure location to which access is restricted—for example, in a locked office or room to which only those people who need to use them have the key.

Take Care With Email

Make certain that both you and your employees take care not to inadvertently disclose trade secrets in email. Always keep in mind that an email recipient can easily forward copies of a message to any number of others. Given the enormous volume of email and the fact that it is transmitted over the Internet in small packets rather than all at once, it’s unlikely that anyone will intercept a specific email message in transit. Email is most likely to be read by unauthorized people when it is stored on a computer after it’s composed and sent. It’s wise to encrypt any email that contains any particularly sensitive information. This will make it difficult or impossible for your email to be read without your permission.

Label Information Confidential

Documents (both hard copy and electronic), software and other materials containing trade secrets should always be marked “confidential.” This is the best way to alert employees and others that a document contains trade secrets. Moreover, nondisclosure agreements—including those in this book—require that trade secret documents be marked this way.

Here is some language you can use on any type of trade secret material:

THIS [choose one: program, document, database] IS CONFIDENTIAL AND PROPRIETARY TO [your company name] AND MAY NOT BE REPRODUCED, PUBLISHED OR DISCLOSED TO OTHERS WITHOUT COMPANY AUTHORIZATION.

You should also obtain a rubber stamp reading CONFIDENTIAL and use it to mark documents when it’s inconvenient to use the longer notice above.

lightbulbDon’t mark everything confidential. Don’t go overboard and mark everything in sight confidential. If virtually everything, including public information, is marked “confidential,” a court may conclude that nothing was really confidential. It is better not to mark anything than to mark everything.

Computer code

It’s wise to combine a confidentiality notice with a copyright notice, like this:

THIS PROGRAM IS CONFIDENTIAL AND PROPRIETARY TO   [your company name]   AND MAY NOT BE REPRODUCED, PUBLISHED OR DISCLOSED TO OTHERS WITHOUT COMPANY AUTHORIZATION.

COPYRIGHT �[year] BY [your company name]

Or, if the work is unpublished, use a notice like this:

THIS PROGRAM IS CONFIDENTIAL AND PROPRIETARY TO [your company name] AND MAY NOT BE REPRODUCED, PUBLISHED OR DISCLOSED TO OTHERS WITHOUT COMPANY AUTHORIZATION.

COPYRIGHT � [your company name]. THIS WORK IS UNPUBLISHED.

Mark all copies of source code with such a notice. Also, when you create source code, flowcharts or data compilations on your computer, include a notice at the beginning and end of the work and a few places in between.

Faxes and email

Try to keep faxing and emailing of trade secrets to a minimum. When it’s unavoidable, be sure to include a confidentiality notice such as this one:

THE MESSAGES AND DOCUMENTS TRANSMITTED WITH THIS NOTICE CONTAIN CONFIDENTIAL INFORMATION BELONGING TO THE SENDER.

IF YOU ARE NOT THE INTENDED RECIPIENT OF THIS INFORMATION, YOU ARE HEREBY NOTIFIED THAT ANY DISCLOSURE, COPYING, DISTRIBUTION OR USE OF THE INFORMATION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS TRANSMISSION IN ERROR, PLEASE NOTIFY THE SENDER IMMEDIATELY.

This notice will make it clear to people receiving the fax or email that it contains trade secrets and should be treated with care. It can be placed on a fax cover sheet or at the beginning of an email message.

Don’t Write Down Trade Secrets

Perhaps the best way to maintain a trade secret is not to write it down at all. Particularly in small companies, a good deal of sensitive information—marketing plans, for example—can be transmitted orally to those who need to know.

>Trade Secret Programs: Advanced Protection> Back to NDA Index

 

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