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Many businesses protect their trade secrets to prevent unfair competition. As a business owner, you will want to safeguard the crucial formulas, methods, or financial information you worked hard to develop or acquire.

How can you keep important business information secret? Do you have to register for trade secret protection? Discover what statutory law says about protecting industry knowledge and when you may want to consult a trade secrets attorney in Phoenix, AZ.

What Is a Trade Secret?

Trade secrets may include formulas for foods or beverages, programs, algorithms, and other technical and scientific information. Marketing studies with high commercial value can also be trade secrets.

According to trade secret policy, confidential information is considered a trade secret if it:

• Derives independent economic value due to it not being widely known
• May bring profit to others who cannot gather this information through honest commercial practices
• Is subject to reasonable efforts to keep it secret, like limited access or non-disclosure agreements.

Do You Have To Register for Trade Secret Protection?

Unlike patent protection, protecting a trade secret does not involve registration. Instead, you as the trade secret owner must safeguard your confidential information.

This lack of a formal trade secret process has both pros and cons. On the one hand, unlike patents, trade secrets have no time limit. Potentially, you could guard your trade secret information forever, like the Coca-Cola formula that has remained a mystery for over a century.

However, as a trade secret holder, you do not benefit from the protections of patent law. If someone acquires the same information through a legitimate process like reverse engineering, you can typically do nothing to stop them from using it. You may also have no recourse if your business and commercial information leaks to the public.

The Basics of Trade Secret Law

Although you cannot secure trade secrets as you would a patent, federal law still helps keep trade secret information confidential. The U.S. economy loses hundreds of billions every year to industrial espionage, which the government has declared a national security matter. Stealing and illicitly using trade secrets is an offense punishable through federal court.

The Economic Espionage Act (EEA) addresses stealing trade secrets with the intention of benefitting foreign entities, specifically when the offense harms the original trade secret holders. The Defend Trade Secrets Act (DTSA), a 2016 amendment to the EEA, further clarifies what a trade secret is and what constitutes misappropriation of trade secrets

In additional to national trade secret laws, the majority of states have enacted the Uniform Trade Secrets Act (UTSA), which makes trade secret law more uniform on the state level. Trade secret owners can sue persons who reveal or use their secret information without permission. Courts can order the misappropriation to stop and award damages to the lawful owner.

What Is Trade Secret Misappropriation?

Trade secret misappropriation includes any unlawful sourcing, using, or public disclosure of trade secrets. Some examples are:

• Unauthorized acquisition of trade secrets by hacking into a business database, stealing files, or bribing an employee to reveal confidential information of high economic value.
• Corporate espionage, e.g., infiltrating a company as an employee while working for a competitor at the same time.
• Using or sharing intellectual property without the original owner’s express or implied consent. For instance, an ex-employee may share their former employer’s trade secrets when they move to work for a competitor.

How Can You Protect Your Trade Secrets?

Now you know the answer to “Do you have to register for trade secret protection?” is “No.” How, then, should you protect your secret knowledge and keep your business’s competitive edge?

Securing your intellectual property (IP) portfolio should be one of your chief priorities. To maintain secrecy and reduce confidential information risk, you can:

• Catalog information that gives your company a competitive advantage, like algorithms, formulas, methods, and so on.
• Use reasonable efforts to protect trade secrets from unauthorized third parties, e.g., limit access to information, encrypt data, invest in cybersecurity, and clearly label documents and emails containing protected information.
• Establish information safety protocols your employees must follow and run periodic refreshers for your team.
• Work with an experienced business lawyer to draft clear, enforceable non-disclosure and non-compete agreements for employees, partners, providers, and licensees.

Trade secrets often leak when an ex-employee leaves your company to work for a competing business. To avoid this, conduct exit interviews to make sure departing workers understand the terms of their non-disclosure or non-compete agreements.

What Can You Do If Someone Steals Your Proprietary Information?

What if you have taken every reasonable measure to protect your trade secrets, but someone still steals your confidential information? As the trade secret owner, you can file a civil lawsuit and pursue compensation for any losses you suffered because of the misappropriation.

You can also request the court to order the offender to stop using the proprietary information. Of course, the other side may claim that they discovered the secret by legitimate means like reverse engineering.

If the misappropriation happened through illegal actions like hacking or passing trade secrets to foreign bodies, the offenders may also face criminal charges under the EEA. A conviction may lead to fines and prison time.

If you suspect that someone breached your trade secrets, start by collecting evidence. You will need to prove misappropriation. Look for unauthorized access logs, confidentiality agreements, and any documents showing that the information was legally protected. Also take urgent steps to protect any other valuable information. Tighten security, change passwords, and refresh protocols.

Finally, talk to a corporate attorney to plan your next steps. An experienced lawyer can let you know whether a lawsuit is an option and what outcome you may expect.

Keep Your Trade Secrets Protected With The Anthony Law Group

Are you asking, “Do you have to register for trade secret protection?” Concerned about potential misappropriation of trade secrets?

At The Anthony Law Group, we handle everything related to business and employment law, from a business license in Arizona to intellectual property laws and breaches of contract. We can help you keep your valuable trade secrets safe and navigate trade secret disputes. Contact us today to schedule a consultation.