Application Assignment 3 (Chapter 8)

How Can You Protect Your Trade Secrets?

Most successful businesses have trade secrets. The law protects trade secrets indefinitely, provided that the information is not generally known, is kept a secret, and has commercial value. Sometimes, of course, a business needs to disclose secret information to a party in the course of conducting business. For example, a company may need to hire a consultant to revamp a computer system, an engineer to design a manufacturing system, or a marketing firm to implement a sales program. All of these individuals may need access to some of the companys trade secrets. One way to protect against the unauthorized disclosure of such information is through confidentiality agreements.

Confidentiality Agreements

In a confidentiality agreement, one party promises not to divulge information about the other party to anyone else or to use the other partys confidential information for his or her own benefit. Confidentiality agreements are often included in licensing and employment contracts, but they can also be separate contracts. The key is to make sure that the agreement adequately protects the trade secrets and applies to any related transactions between the parties. For instance, if you execute a separate confidentiality agreement with a marketing firm, you need to make sure that it refers to any other contracts you have made with that firm prior to the confidentiality agreement. Also, subsequent contracts with the firm should either refer back to the confidentiality agreement or include a new confidentiality provision.

Defining the Scope of the Agreement

Confidentiality agreements must be reasonable. Businesspersons should consider what information needs to be protected and for how long. Make certain to define what you mean by confidential information in the agreement. Do you want to protect just your customer list or all financial, technical, and other business information? Think ahead, cover the bases, and be specific.

The duration of the agreement usually depends on the nature of the information. Very important secret information should remain confidential for a longer time than less important secrets. Sometimes, as with an advertising campaign, the time period for confidentiality may be self-evident (if the campaign ends in six months, for example). Tailor the agreement to your needs as much as possible. If the party to whom you are disclosing information will no longer need the information after a certain datesuch as when the project is completedinclude a provision requiring the return of confidential information after that date. This will alleviate concerns that your confidential trade secrets might later fall into the hands of a stranger.

Checklist for the Owner of Trade Secrets

1Determine what your trade secrets are and who may need access to them.

2Make sure that confidentiality agreements define, in an all-inclusive manner, what information should be considered confidential.

3Specify a time period that is reasonable under the circumstances.

4Identify the agreements to which the confidentiality provisions apply.

5Require that the confidential materials be returned to you.

6Create a mechanism to enforce the policy.