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AN OUNCE
OF PREVENTION –
How To Protect Your Company’s
Confidential Information
A Company’s most valuable
asset might also be its best kept secret – trade secret
that is. Trade secrets consist of confidential business
information that can give a business a unique advantage over its
competitors. The non-authorized disclosure of confidential
business information can create a broad range of costly issues
for companies, including loss of revenue, loss of
competitive advantage, loss of market share, damage to business
reputation and increased costs. The sources of misappropriation
of confidential business information stem from current and
former employees, customers and clients, third-party
contractors, vendors and suppliers and strategic partners.
The best known example of a trade secret is the formula for
“Coke”. But did you know that almost every business -- no
matter how small -- has trade secrets? Just a few common
examples include customer lists, financial data, manufacturing
data, drawings, mailing lists, pricing information, processes,
computer programs, product specifications and strategic plans.
Unlike other types of intellectual property (such as patents,
trademarks and copyrights), trade secrets are protected by
confidentiality and not through public disclosure
that comes with government registration or filings. In fact, in
order to qualify for trade secret protection, the information
sought to be protected must not be publicly known.
Keeping business information confidential – while still
being able to use it – can therefore be the key to protecting
the information as a trade secret.
As a matter of standard business practice, every Company should
implement policies and procedures that are designed to ensure
the confidentiality of its business information. As a
legal matter, a Company must take “reasonable measures” to
protect confidential information if it considers that
information worthy of trade secret protection. There is
no bright line test for determining reasonableness, and
ultimately it is a question of fact for a jury. With respect to
third parties such as vendors, suppliers, distributors, clients
and customers, at a minimum a Company should identify its
confidential information, mark it “Confidential”, limit access
and require recipients to execute a properly-drafted
Confidentiality Agreement.
A Company’s employees may pose the greatest threat of
misappropriation. This is especially true in light of
the increased use of technology in the storage and communication
of business information. Information previously kept in filing
cabinets under lock and key is typically stored on a server,
hard drive or extranet. Modern technology makes for the
undetected and instantaneous duplication, transportation and
communication of business information through thumb drives, PDAs,
Company e-mails and by other means.
In view of the increased risk of misappropriation posed by
employees, a Company should consider taking the following steps
to protect confidential business information:
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Require incoming
employees to execute the appropriate Confidentiality Agreements
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Consider whether
non-solicitation and non-compete covenants should be included in
Confidentiality Agreements to further deter the disclosure of
Confidential Business Information
-
Identify Confidential
Business Information and mark it “Confidential”
-
Limit access to
Confidential Business Information to employees who have a need
to know and prohibit the general dissemination of the
information
-
Implement policies
concerning the use of external storage devices, Company e-mail,
security passwords and technology-related resources
-
Communicate Company
policies regarding Confidential Business Information
effectively, considering the proper use of employee handbooks
-
Monitor access and use of
Confidential Information and conduct annual audits
-
Train employees in the
identification and use of Confidential Business Information
-
Conduct exit interview
with departing employees and require the execution of
certifications related to the use of Confidential Business
Information and technology resources
-
Consider other controls
that might be reasonable to protect a Company’s Confidential
Business Information
A Company’s trade secrets
might well be a valuable asset, providing the path to economic
success. The proper handling of Confidential Business
Information, especially in today’s technology-driven business
environment -- is paramount to the protection of trade secrets
and intellectual property. All businesses should develop
policies and procedures designed to restrict access and monitor
the use of Confidential Business Information.
© Lana K. Hawkins
HAWKINS
LAW LLC is a multi-service solo law practice, representing
individuals and businesses in communities across Alabama. Lana
Hawkins has twenty years of private practice legal experience.
Bringing Big Firm Experience To Main Street
261 S. Main Street
(256) 586-4510
Arab, AL 35016
www.hawkinslawllc.com
No Representation is Made That the Quality of
Legal Services To Be Provided Is Greater Than The Quality
Provided By Other Lawyers
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