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
There are three important activities involved with
protecting trade secrets:
- Identifying trade secrets.
- Developing and implementing protection
- 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
- Maintain logs of which employees have been
provided sensitive materials.
- Use secure passwords for company computer
- Destroy or shred sensitive documents
- Permanently erase computer records from
computers to be discarded or sold.
- Provide locked cabinets, use locked doors and
- Encrypt documents that will be sent
- 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
- 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
- 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
- Why trade secrets are important to the
- How to recognize what is a trade secret.
- Examples of the organization’s trade
- 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
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
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:
||Disclosure during visits to and
from customer or in documents provided.
||Learning from joint development
||Financial audits conducted by
||Quality system audits conducted
by outside firms.
||Security of computers connected
to the Internet and all electronically stored
||Employee lists and records.
||Proprietary processes visible
during visitor tours.
||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
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
- U.S. Patent and Trademark Office: www.uspto.gov .
“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
- Copyright Office: http://lcweb.loc.gov/copyright
. “This Web site offers basic information
about copyright, fee schedules, application forms,
circulars explaining copyright principles, and
links to copyright statutes.”
- Cornell Law School: www4.law.cornell.edu/uscode
. “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
- Franklin Pierce Law Center: www.ipmall.fplc.com
. “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
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.