What Are Trade Secrets?

Regardless of what industry you are in, there are likely several trade secrets that employees have access to. Trade secrets refer to specific information a business has that helps differentiate its products or services. If confidential information landed in the wrong hands, it could mean financial distress for a company on several levels.

For fast food industries, it could be their unique recipes or how they make certain items on their menu that sets them apart from their competition. The New York Times doesn’t reveal how books make it to their best-seller list, making the requirements part of their trade secrets. Google has an algorithm that many would love to find out for various reasons, but it is their special trade secret.

If any of these were revealed, it could mean businesses no longer have the edge on their competition and could quickly equate to financial ruin.

Protecting trade secrets at all costs is essential to any business, regardless of the industry. Are businesses adequately protected from misappropriations?

Read on to learn more.

Colorado Uniform Trade Secrets Act

Colorado follows the Colorado Uniform Trade Secrets Act, or CUTSA, regarding trade secret misappropriation. As it states, a “trade secret means the whole or any portion of phase of any specific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.”

Furthermore, the business owner must prove that they took appropriate measures to prevent the secret from becoming public knowledge or land in the hands of those the owner selected to be privy to the information.

This definition vastly broadens the scope of what some may have considered a trade secret: a particular recipe or a specific action.

What Factors Help to Portray a Trade Secret Exists?

Courts will generally review several factors to determine whether a trade secret exists. Some of the factors they will thoroughly review are how many people within the business had access to the trade secret.

If nearly all or all of the employees in a large business had access to a trade secret and were allowed to discuss it openly, it may be challenging to prove that knowledge of it was confidential.

Courts will also attempt to determine how many people outside the business knew the secret. Is it something that has been common knowledge for years and was never an issue? If so, it’s not likely that the item would be considered a trade secret.

What costs and time were associated with developing the trade secret? Was it something that took the business years to perfect and a substantial investment to uphold?

How much time and effort would it take a competitor to duplicate the same trade secret, whether a specific service or item was created to leverage competition in the industry?

What means were used to help guard the secret from others, and what policies were in place to ensure the trade secret remained protected and confidential?

Courts will review all the above information and any other relevant information based on the industry needs to determine if an infraction was made.

Protection from Trade Secret Misappropriation

There are several ways in which businesses can protect themselves from trade secret misappropriation. One of the most common is to limit access. Companies can create several layers of protection by restricting access to certain people within the business, protecting that information through passwords, access to specific servers through those passwords, and more. With a multi-level security approach, it’s less likely that someone can surpass several levels of security.
Conduct regular audits to ensure that information remains secure and access hasn’t been granted to unapproved parties. Review desktops, laptops, USBs, digital files, and more to provide access that hasn’t been granted without permission.

Vendor contracts can be used with all vendors to ensure they aren’t revealing information that could jeopardize your success. Using multiple vendors rather than one to create the pieces you may need can also provide extra protection because they typically won’t be able to deduce your trade secrets with only limited information.

Employee training and policies should be in place for all existing and new employees. You can control what they have access to, what policies are in place, and the consequences for not adhering to them.

Protection and Guidance From the Professionals

Work with your experienced business attorney to review the contracts you have in place or create necessary ones. Business owners often make the mistake of creating a Non-Disclosure Agreement that doesn’t sufficiently address their needs.

Another common mistake is that Non-Compete Agreements infringe on employees’ rights. Having an experienced legal professional review the contracts that you have in place or create new ones can ensure necessary protection against strict laws on state and federal levels.

Fiercely Protective Legal Guidance

The bottom line is that even with all the parameters in place, one can never feel sufficiently protected against trade secret misappropriation if they don’t have a thorough understanding of it. It could be too late if you aren’t proactive in protecting what’s most valuable to your company, which is your trade secrets.

Don’t let your hard work and progress in your business be jeopardized due to lack of protection.

Call our office today at (303) 557-2011 to learn how we can best protect you. Your dream of running your business deserves to be protected at all costs so it can continue to provide the life you dreamed of for years to come.