Please Protect Your Intellectual Property – Part V: Trade Secrets


“What’s a trade secret? Does such a thing apply to me and my business?” Most likely the answer is yes!

The U.S. Patent and Trademark Office says that trade secrets are:

information that companies keep secret to give them an advantage over their competitors. Trade secrets consist of information and can include a formula, pattern, compilation, program, device, method, technique or process. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.

A classic example of a trade secret is the formula for Coca-Cola. It was never patented and it was only known to a very few trusted people. It was this very secrecy that makes it so valuable. Another common example is software source code. Certain other information such as customer preferences, research and development trial and error, and vendor lists can also be trade secrets if they are kept confidential and if a competitor would be given an advantage simply by knowing them. (Reference three) tells us that trade secrets can include any type of data that gives “you an edge over your competition” like “product designs, customer lists, (and) sales forecasts.”

Congress recently took notice of the value of trade secrets and the harm done by theft of them and passed the Defend Trade Secrets Act of 2016. This law gives companies the right to bring a federal lawsuit to protect their trade secrets if they have been stolen. It also provides for such tools as temporary restraining orders and injunctions, ex parte seizure of property (the possibility to take back your trade secrets without the defendant even being heard by the court), and treble damages and recovery of attorneys fees. This act is another arrow in the quiver for a company attempting to protect its trade secrets.

The physical security of the protected material must be considered. If documents or information are not kept confidential, they cannot be protected as trade secrets. Protected documents need to be stored in a manner that reflects their importance and sensitivity. Only appropriate people should be given access and even then only on a “need to know” basis with the appropriate agreements in place.

The people to whom you give access need to know that the information is considered trade secret. They need to protect it as such. To that end, marking the documents is important. Many companies use phrases such as “PRIVATE,” “PROPRIETARY,” or “CONFIDENTIAL” placed in the header and footer of each protected document.

The cyber security of the protected material is also critical. Placing electronic data in a storage mechanism that can be accessed from the internet demands appropriate action to secure it. This includes using secure servers, utilizing passwords, having the ability to lock people out of their access, granting limited rights, and other precautions in order to protect this electronic information.

Proprietary Data Agreements, Confidentiality Agreements, Non-Disclosure Agreements, and Electronic Privacy Policies are another form of protection. Employees and those who are part of trusted business relationships (such as contractors, vendors, suppliers, and more) should be made to sign such agreements before being given access to sensitive information. When relationships end, the protected data and information should be collected and returned. Employers should always remind employees upon their departure of the company (whether voluntary or involuntary) of their commitments to return company property and information and to not use it for any purpose.

Businesses need to identify the information that is valuable to them and then seek the advice and counsel of qualified professionals to implement a plan to protect that valuable information. And if you ever suspect that your trade secrets have been misappropriated, contact your attorneys immediately to seek help. It is the only way to protect your assets.

This is fifth and last in this blog series on Intellectual Property.


STEVE CZERNIAK – Mr. Czerniak retired after a successful career that culminated in fifteen years of experience as an internal consultant and “change agent.” He is currently an Expert-in-Residence at the Macomb-Oakland University Incubator and a volunteer with the Troy Historic Village and Historical Society.

PAUL M. MERSINO for BUTZEL LONG – Founded in 1854, Butzel Long is one of the oldest firms in the Midwest United States and has offices in Michigan, New York, Washington, D.C., and alliance offices in Mexico and China. Since our inception, we have played a prominent role in the development and growth of many industries in Michigan. Our firm has over 3,000 geographically diverse clients that are active in national and international markets. These clients come from many sectors, including advertising, automotive, banking and financial services, construction, energy, healthy care, insurance, manufacturing, media, pharmaceuticals, professional services, publishing, real estate, retail and wholesale distribution, technology, transportation, and utilities.

REFERENCES:  1); 2); 3),d.amc

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