How to Protect your Trade Secrets

A recent decision from the Seventh Circuit is another wake-up call that if a business wants to protect its trade secrets, it must actually implement reasonable measures to protect the secrecy of that information What is “reasonable” depends on the facts of each case and generally includes all or most of the following measures, even when the business gets a Confidentiality or Non-Disclosure Agreement:

  1. Keep company secrets, well, secret.
  2. Mark sensitive documents as “confidential and proprietary”;
  3. Keep secret documents, processes, formula and any trade secrets under lock and key or on a computer with security measures in place
  4. Obtain a Confidentiality Agreement at the beginning of all business relationships;
  5. Get all parties AND THEIR EMPLOYEES to sign confidentiality agreements;
  6. Get all vendors (such as manufacturers) AND THEIR EMPLOYEES to sign confidentiality agreements; you cannot rely on a general policy of your vendors that that the policy is not to share confidential information and it is done so on a need to know basis;
  7. Put all business agreements in a writing that includes a confidentiality agreement;
  8. Obtain a confidentiality agreement from all of your company’s employees.

In this recent case, the plaintiff designed metal enclosures for electronic tablets, such as iPads.   The defendant, a manufacturer of metal devices, approached the plaintiff about a potential business relationship.  The plaintiff and defendant entered into a confidentiality agreement under which the plaintiff agreed to disclose confidential information to the defendant that would be used by the defendant solely for evaluating a potential business relationship with respect to iPad enclosures.

After the defendant signed the confidentiality agreement, plaintiff provided defendant with its design files.  The plaintiff and defendant subsequently attempted to negotiate a written manufacturing and sale agreement, but ultimately entered into an oral agreement for manufacture of the tablet enclosures.

At the same time, defendant developed a design for its own tablet enclosure.  Thereafter, defendant terminated its business relationship with plaintiff and proceeded to sell its own tablet enclosure.

The court recognized that in order to enforce a confidentiality agreement, the information that plaintiff sought to protect must actually be confidential and the plaintiff must have taken reasonable efforts to maintain the confidentiality of that information.  However, the court found that the efforts that the plaintiff took to protect the confidentiality of design files were inadequate.

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How to Protect your Trade Secrets

A recent decision from the Seventh Circuit is another wake-up call that if a business wants to protect its trade secrets, it must actually implement reasonable measures to protect the secrecy of that information.