Trade Secrets Primer
IP Protection – Consider These Issues When You Own IP
Protection is required for businesses and comes in several different forms. You must consider different relationships in order to protect your business fully. This information I hope will help you consider all necessary legal issues to protect your IP.
Intangible Assets Need Protection Too
The need to protect tangible assets every day is perfectly clear to most companies. You invest in fire alarm systems, lock your doors and insure your physical property. For electronic data, you use firewalls and software to protect your networks and data. But how much have you invested in protecting your intellectual property?
Intangible assets set a company apart from the rest. Very often it is the company’s ideas, methods, knowledge, or research that leads it to success. It can be your secret formula or special in-house training and methods that make the difference. Many businesses go to great lengths to protect their intellectual property. You may not think that your business has any legally protectable methods, but 99% of companies do.
IP law protects your exclusive right to market, use and identify intangible assets. If you do not use the laws properly you may lose this exclusive right and it can cost you money as your competitors succeed at your expense.
It Is Easy to Protect
Though often overlooked by smaller businesses, implementing these protections is easier and cheaper than you might think- and the value of preventing theft and misuse can far, far exceed this investment.
The following is a brief analysis of intellectual property as it may affect your business and what steps you can take to protect your most valuable assets.
What Are Trade Secrets and Confidential Information?
These terms are almost synonymous. The terms refer to private information used by your company; information that you keep secret. It may be a secret formula or patented product, but it may also be something less obvious. Have you invested time and money in developing your sales process? Has one of your employees designed a custom invoicing system? Have you modified your database software to tailor it to your exact needs?
Examples are business processes, vendor prices, customer lists, troubleshooting manuals, software code, vendor identities, manufacturing methods, financial information, market research, pricing data, research and development, and market forecasts. What do you know that your competitors do not? That is your business’ trade secret, and it is one of your great advantages.
But, the catch is that the law requires business owners to “take reasonable steps to protect the information”. If you do not take these steps and someone uses this information in competition with you, you may not be able to prevent others from using it, even if you think it is “yours”.
Three Inflows and Outflows
A typical company’s IP is comprised of three unique, two-way inflows and outflows – employees, contractors and vendors. Each of these flows should be protected.
A company’s employees not only have knowledge of your company’s trade secrets, but they are often the primary people using your key information on a daily basis. A recent national survey by Symantec found that 59 percent of employees who quit or were laid off or terminated in the last 12 months admitted to stealing company data.
Employees refine business processes, improve systems, and develop entirely new products. It is imperative that every company takes steps to protect this intellectual property. Imagine what could be lost if a key employee shared your trade secrets with a competitor or even started his own competing business.
A short-form employment agreement should make it clear that intellectual property is confidential, belongs to the company, and is not to be used or disclosed for anyone else’s benefit, including an ex employee. It should also specify that any inventions or innovations developed by the employee in the course of her employment become the property of the company. Lastly, we include an at-will employment acknowledgment, protecting your right to terminate an employee for any reason that is not otherwise prohibited.
Companies frequently hire outside contractors such as code-writers, engineers, marketers, and consultants for many reasons. They may be hired to develop a website, design a new billing application, or even to work as a temporary or seasonal employee. Consider the situation of the independent software developer who designs your client management program to your exact specifications and then imagine if this person tries to sell the program to an opportunistic competitor.
You must possess a signed agreement with every contractor, including clauses that at least (1) prevents them from using or disclosing trade secrets you share with them and (2) make clear that anything they develop for you is the property of your company. Such an agreement ensures that there will be consequences if a contractor abuses the intellectual property with which you have entrusted him.
Without such a contract you probably do not own their Work Product. Most business owners may not be aware of this.
If your company’s products are manufactured by a third party, you have likely given this vendor confidential information about your products. Many unscrupulous vendors will give this information to their other customers. If you do not have a clause protecting your IP, then you may have no recourse if they give your IP to their customer who is your competitor.
If you have a contract, you will be able to seek to have your vendor make good on your lost profits. It needs to be clear in your purchase order or contract that even though the vendor may be the one producing your product, the design and process is still owned by your company.
If your company does not carefully protect its most valuable asset, intellectual property, then no one else will. A court often will not protect your trade secrets or confidential information unless you have (1) defined what information is to be protected and (2) have systems to protect your IP.
Our lawyers work with companies like yours every day to identify your most valuable assets and to ensure that you have taken the steps necessary to protect these assets. Contact us today for an assessment of your current IP protection plan. Ensure that one of your most valuable assets, your intellectual property, remains yours. We can help you assess what IP protection will help create/protect your profits.
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If we can help you or you would just like to talk to us, please call our office or send us an e-mail. References are available upon request.
We wish you the best of luck with your business!
Charles B. Brown
Charlie concentrates in IP (Intellectual Property) Law. Charlie has 37 years of experience as an accomplished attorney for businesses in diverse industries nationally and internationally, including as in-house counsel where he came to fully understand how to serve business clients best. He has served in leadership roles at the Chicago Bar Association and Association of Corporate Counsel and writes on IP topics.
He is active in North Shore civic affairs. He likes sailing, softball, platform tennis, old boys rugby, mountain climbing, and working on his 1967 Cutlass Supreme convertible with 206,000 miles.