LOOSE LIPS SINK SHIPS: PROTECTING TRADE SECRETS
Most new businesses spring from a good idea; a “Eureka!” moment about how to do something that nobody’s ever done before, or maybe how to do it better than anyone else ever has. Perhaps it’s a new product or a service that will capture peoples’ imagination and attention (and hopefully their wallets, too), such as a formula for a tasty soft drink, or a computer program or an algorithm to help you do certain things online. You start to get excited the more you think about developing it, and pretty soon you want to tell anyone who’ll listen all about every aspect of it…how it works, what you figured out it that nobody else had, and why it’ll be the best darn thing the world has ever seen.
Resist that urge, particularly at the early stages and until you’ve had the benefit of qualified advice. Because if you’re not careful, you may risk giving your great new idea away for free to someone you’ve never even met. During the second world war, the United States Government introduced and promoted the slogan “Loose lips sink ships”, urging everyone to be careful towards sensitive information. That advice, dating back more than eighty years, remains valid in business to this day.
Though defined differently throughout the world, trade secrets are generally understood to mean particular practices or processes, often resulting from proprietary research or development, that are not generally known to the public and which provides some type of competitive advantage within the marketplace. In other words, trade secrets are pretty much what they sound like: information known only to certain parties because of its intrinsic economic value for the purpose of trade or commerce. But in order to merit legal protection as a trade secret, the involved parties must also take reasonable steps to maintain the confidentiality or privacy of the information.
This is distinguishable from a patent, which also extends legal protection to particular practices or processes. But the distinction is that in order to be protected as a patent, the developed information must be publicly disclosed as a matter of record, whereas in order to be protected as a trade secret the developed information must instead be concealed from the public in the course of ongoing operations. Furthermore, patent rights only exist for limited periods of time following which the protected information falls into the public domain. Trade secrets, by contrast, are protectable for as long as they are kept secret.
Popular examples of protected trade secrets include the precise formula of ingredients for Coca-Cola® (and until recently, Kentucky Fried Chicken®), and Google®’s ever-evolving search algorithm among others. The New York Times Bestseller list, which has its own ‘secret sauce’ that makes it more than just a list of ranked sales statistics, is yet another example.
In most instances, trade secrets are protectable under legal theories extending to unfair competition. In some cases, trade secrets are considered to be property in and of themselves, and protectable as such. Other jurisdictions may consider them to be equitable rights with remedial value in the event of their unauthorized misuse. The United States, for example, now extends federal criminal protection for trade secrets under the Economic Espionage Act of 1996, and more than 45 states have adopted state legislative protection as well. Thailand enacted the Trade Secrets Act B.E. 2545 in 2002 to formalize a means of protection within the kingdom, (note: interestingly, for a period of time trade secrets could even be voluntarily registered with the Department of Intellectual Property as a means to facilitate the use of evidence in cases of infringement; however the registry was abandoned in 2013, presumably and perhaps ironically, in response to peoples’ unwillingness to file public records pertaining to their confidential information). Courts in England and Wales have upheld the unauthorized use of trade secrets as breaches of good faith.
So what can you do to protect your business secrets? Start by figuring out what secrets you have to protect. Maybe it’s a secret formula, or a compilation of data (such as a mailing list), or a computer program, or a manufacturing procedure. Whatever and wherever they may be, be sure to classify or otherwise label any documents describing them as confidential and proprietary, and them store them away safely somewhere in a secure physical or digital location that can be adequately monitored. To the extent you have business confidential information on your computers – and these days, who doesn’t? – secure those computers from unauthorized access or outright theft. Secure your overall premises, for that matter, by limiting the public’s general access to your offices in some manner.
Limit access to confidential information within your company or organization on a need-to-know basis, and set out a clear policy in this regard that is regularly communicated to your staff, and acknowledged by them to have been understood. And last but not least, take reasonable steps wherever possible to maintain secrecy when communicating with outside parties. In other words, as and when you’re finally ready to share your secret information with someone, make sure you tell them that it’s secret information if you expect them to regard it as such. This might be accomplished by means of a Non-Disclosure Agreement (NDA) that they agree to sign as a condition for receiving it. Alternatively, a sending party can utilize a self-generated claim of rights certification from such IP services as PitchMark. Launched in 2016 as a means to help creators promote their commercial ideas while still protecting them, PitchMark now services a community of more than 1,000 innovators worldwide who use it to signal to those with whom they share their ideas that they are its creators, and that they wish to be respected as such.
Secrets of any type can be hard enough to protect sometimes, even under the best of circumstances. It becomes even more challenging when secrets have an economic value of their own and are at the core of your business operations.
(c) 2023 Frank Rittman
