ASQ - Team and Workplace Excellence Forum

Online Edition — November 2002

In this issue...
Case Study and Commentary: Supply Chain Redesign
Sharing Information in Customer-Supplier Relationships
Our Readers Say...
Protecting Your Trade Secrets
Chapter News
Your Opinion: Books in Review
Book Nook
Editorial: From Our Perspective
What’s Up?
November 2002 News for a Change Homepage

NFC Index

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Protecting Your Trade Secrets

As seen by comments made in this month’s member survey (see “Our Readers Say...”), problems that result from deliberate or inadvertent disclosure of proprietary information, also known as trade secrets, can be significant. At the very least, it can result in the loss of good relations between the disclosing party and the organization whose secrets were lost. At the worst, there may be legal repercussions if a formal confidentiality agreement was breached. In any event, such problems are avoidable if both sides of an information exchange understand the basics regarding protection of trade secrets.

There are three important activities involved with protecting trade secrets:

  1. Identifying trade secrets.
  2. Developing and implementing protection plans.
  3. Educating employees.

The first and most important step any organization needs to take with respect to its proprietary information is to deliberately identify it. With some thought, nearly every department will discover proprietary information that needs protection. A typical way to accomplish this discovery process is to conduct a special internal audit. Such an audit may be performed by company personnel or by a lawyer specializing in intellectual property.

Once an organization’s intellectual property is identified, the next step is to determine how each different kind is to be protected (whether by trademark, copyright, patent, or as a trade secret), and to institute that protection. In her book, Protecting Your Company’s Intellectual Property (see this month’s “Book Nook”), Deborah Bouchoux gives a long list of ways to protect trade secrets (condensed from pp. 196-7):

  • Restrict access to confidential materials.
  • Stamp documents as “confidential.”
  • Maintain logs of which employees have been provided sensitive materials.
  • Use secure passwords for company computer systems.
  • Destroy or shred sensitive documents on-premises.
  • Permanently erase computer records from computers to be discarded or sold.
  • Provide locked cabinets, use locked doors and security systems.
  • Encrypt documents that will be sent electronically.
  • Log in visitors, use visitor badges, and accompany all visitors.
  • Restrict access to photocopiers or require use of secure activation code.
  • Hold meetings to discuss sensitive information off-site.
  • Assure premises protected by alarms, security systems, and security personnel.
  • Require employee, customer, supplier, and visitor nondisclosure agreements.

Depending on the sensitivity of the information and how it is stored (paper, electronic, or human memory), more than one type of protective mechanism may be warranted.

In addition, develop policy regarding:

  • Disclosure of trade secrets to others.
  • How to protect trade secrets disclosed to the organization by others.
  • How to deal with inappropriate disclosure, including levels of remediation.

The third step in protecting trade secrets is the education of all personnel. This education should not be just for people with obvious contacts outside the business (such as sales and purchasing personnel), but for all members of the organization. Training should include:

  • Why trade secrets are important to the organization.
  • How to recognize what is a trade secret.
  • Examples of the organization’s trade secrets.
  • The plan for protecting trade secrets.
  • Policies regarding trade secrets.
  • How to deal with inappropriate disclosure.

Employees who have this knowledge and understand its importance to their organization are more likely to assure protection of trade secrets. For those in a customer-supplier relationship with people in another organization, this knowledge is especially important.

In the course of doing business there will inevitably be the need to disclose or obtain proprietary information to or from current or potential customers or suppliers. According to Bouchoux, “Such disclosure does not negate the trade secret status of the information as long as proper measures are taken to protect the use and confidentiality of the information.” She states that a common mechanism for protecting this information is the use of a nondisclosure agreement, which commits the recipient to “maintain the information in confidence, usually for one or two years.” In addition, “Some companies include deliberate typographical errors in materials provided to third parties to make it easier to monitor the source of unauthorized disclosures.”

When a company enters into a licensing arrangement, Bouchoux recommends that it “should ensure that the licensing agreement includes clear terms on the permitted uses of the information or product licensed, restrictions against reverse engineering or decompilation of the product, restrictions against unauthorized disclosure, and a requirement that the licensee return all materials upon termination of the license.”

Depending on the nature of the business, concerns about trade secrets are not limited to sales and purchasing departments. Other departments also have concerns. Examples include:

Department Protection Concern
Sales Disclosure during visits to and from customer or in documents provided.
Purchasing Supplier’s confidential information.
R&D Learning from joint development projects.
Accounting/ Finance Financial audits conducted by outside firms.
Quality Quality system audits conducted by outside firms.
Information Services Security of computers connected to the Internet and all electronically stored information.
Human Resources Employee lists and records.
Manufacturing Proprietary processes visible during visitor tours.
Warehousing Security of off-site storage for new products prior to rollout.

Whatever processes are used to protect trade secrets, it is important to remember that, “Once lost, trade secrets are lost forever.” Now is the time to take that extra effort to assure you do not lose this competitive advantage.

To learn more about protecting intellectual property read Deborah Bouchoux’s, Protecting Your Company’s Intellectual Property: A Practical Guide to Trademarks, Copyrights, Patents & Trade Secrets. AMACOM: New York, NY, 2001. Or visit one of the many Web sites devoted to the topic (as described by Bouchoux in the appendix to her book):

  • U.S. Patent and Trademark Office: . “The PTO Web site offers basic information about trademarks and patents, fee schedules, forms, links to related sites, links to pertinent statutes, and information about pending legislation and rule changes. It allows searching of the PTO’s database of trademarks and patents and provides information about the status of pending and registered trademarks and issued patents.”
  • Copyright Office: . “This Web site offers basic information about copyright, fee schedules, application forms, circulars explaining copyright principles, and links to copyright statutes.”
  • Cornell Law School: . “The Web site of Cornell Law School provides easy access to the text of federal statutes relating to trademarks (see 15 U.S.C. Section 1051 et seq.), copyrights (see U.S.C. Section 101 et seq.), and patents (see 35 U.S.C. Section 100, et seq.). Searching can be done by citation of statute, key word, or topic.”
  • Franklin Pierce Law Center: . “This Web site of Franklin Pierce Law Center is commonly known as the Intellectual Property Mall and provides access to hundreds of journals and articles related to intellectual property law as well as numerous links to other valuable intellectual property sites.”
  • American Intellectual Property Association: . “The site of the American Intellectual Property Association provides valuable information on recent and pending legislation affecting intellectual property issues, publications and articles related to intellectual property, and links to other valuable intellectual property sources.”

CHRISTINE ROBINSON has more than 25 years of leadership experience in quality systems for the process industries. She has a master’s degree in quality, values, and leadership from Marian College and is an ASQ-certified quality manager.

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