Bass, Berry & Sims attorney Brian Iverson provided insight in an article published on Chief Executive discussing the need and best practices for executives to protect trade secrets. Unfortunately, many companies are familiar with trade secrets but many don't do a good job of identifying and protecting their own assets. By consciously identifying and protecting trade secrets, companies can increase profits and shareholder value.
"Trade secret laws protect information that: (1) derives independent economic value from not being generally known or readily ascertainable; and (2) is the subject of reasonable efforts to maintain secrecy," explained Brian. With domestic losses from trade secret theft potentially topping $500 billion in 2016, U.S. companies can benefit significantly from proper protection.
For companies to safeguard the value of trade secrets, they must first identify them. Traditional invention harvesting is typically used to identify patentable inventions, but in some situations, trade secret protection may be better. "While patents generally have a 20-year term, trade secrets can theoretically last forever," explained Brian. "Coca-Cola still benefits from trade secret protection in its formula more than 130 years after it was created."
Executives and management teams should also consider whether their competitive differentiators qualify for trade secret protection, although patent protection might be better if the trade secret information can be reverse engineered. "Of course, secrecy is the hallmark of a trade secret," said Brian. "To benefit from trade secret laws, companies should limit the number of employees and business partners who have access to the information, and require those that do to sign non-disclosure agreements."
Identifying and protecting trade secrets aren't the last steps – proactive enforcement is also vital. "If an employee leaves to work for a competitor, monitor the competitor's activities for any indication that the former employee wrongly disclosed a trade secret," said Brian "Federal and state laws provide strong enforcement tools and remedies for misappropriation."
The full article, "Using Trade Secret Protection to Build Shareholder Value," was published on Chief Executive on October 5, 2017, and is available online.