5 Mistakes That Can Derail Your Company’s Trade Secrets

Trade secrets are among your company’s most valuable resources and should be protected at all costs. Whether a list of product ingredients or a new manufacturing process or technique, these intellectual assets can provide a compelling competitive advantage. 

Unlike trademarks or patents, however, trade secrets are only enforceable if kept secret.

Regrettably, many businesses subject their trade secrets to unnecessary exposure — and losing control over such proprietary information can be a major blow.

Keep reading to learn about the five most frequent errors that can invalidate trade secrets.

1. Not Defining What a Trade Secret Is

It’s hard to protect a trade secret if you’re uncertain what a trade secret is in the first place. Product designs, recipes, formulas, algorithms, procedures, price lists, or customer lists may qualify as trade secrets.

However, they must provide your business with an important advantage and not be public knowledge to meet the legal standard. If uncertain about the ins and outs of trade secrets, consult with a trade secret expert who can help your business properly safeguard intellectual property.

To prevent ambiguity, record your trade secrets. Include details such as what they are and why they’re valuable. And disclose the information to relevant parties who understand their confidentiality obligations.

2. Not Using Correct Confidentiality Agreements

Employees, independent contractors, vendors, and even business partners are common sources of trade secret disclosures. That’s where confidentiality pacts are key. 

Non-disclosure agreements and confidentiality clauses should include the following:

• Precisely define the confidential information
• Explain the authorized and unauthorized uses of the information
• Stipulate the duration of the confidentiality agreements

Review and revise such agreements periodically so they continue to offer the right protection.

3. Insufficient Employee Training on Trade Secret Protection

Even if your company has NDAs and agreements, that effort will be all for nothing if the employees have not been trained. The absence of training leads to accidental disclosure since workers might share confidential data without knowing they’re disclosing top-secret information.

All employees should be trained, and training should be ongoing.

4. Ineffective Data Security Practices

Bad security practices — poor password policies or inadequate encryption — can leave your secrets vulnerable to hackers, competitors, or workers with nefarious intentions.

To guard your secrets, do the following:

• Use multi-factor authentication on mission-critical systems
• Encrypt data in transit and at rest
• Restrict access to the trade secret to only those who need it
• Secure communication channels for sensitive information

Scheduling regular security audits can help uncover and prevent vulnerabilities before they lead to breaches.

5. Failure When There Has Been a Breach

Even with proper protection, something may go amiss. Your company must act quickly to potentially soften the fallout.

It’s essential to have a trade secret mishap response that prevents further exposure, lays out the rules of internal investigations, and details options like sending cease-and-desist letters and seeking injunctive relief.

The sooner you act, the sooner you can limit damages and conserve legal protection.

Protecting trade secrets is more a matter of creating a culture of concern and sensitivity and less a matter of possessing the right legal forms and software. Your business must be transparent about what your trade secrets are, have the right agreements in place, educate your employees, safeguard your data properly, and respond to violations immediately.

Once a trade secret is revealed, it’s almost impossible to reverse the disclosure and make it a secret again. Undoing the damage is like trying to get toothpaste back into the tube.

An ounce of prevention is worth a pound of cure. Acting in a proactive manner can secure your competitive advantage — and the future of your company.