Keeping Trade Secrets Secret

According to a recent survey conducted by Symantec Corporation (2009), 59% of individuals who were laid off, fired, or quit their jobs admitted to misappropriating company data.  Of those individuals who misappropriated data, a staggering 67% used the data to leverage a new job.  In a time where information can be a company’s most valuable asset, the misappropriation of information by rogue employees poses a very real and significant threat.  While there is no cure-all to prevent information theft, a company can decrease the risk of misappropriation by implementing trade secret policies and procedures.

Trade Secrets?

Generally, a trade secret is any information that makes a company money by virtue of not being publicly know.  Because a trade secret is a legally-recognized asset, one can sue for misappropriation of that asset under a number of common law theories.   In Illinois, a trade secret is entitled to further protections  if it meets the requirements of the Illinois Trade Secrets Act (“ITSA”).  Under ITSA, a trade secret must be:

information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that: (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.

In deciding whether information is entitled to protection under ITSA, Illinois courts additionally consider: (i) the extent of measures taken to guard the secrecy of information;  (ii) the extent to which the information is known outside of the company’s business; (iii) the extent to which the information is known by employees and others involved in the company’s business;  (iv) the value of the information to the company’s business and to its competitors; (v) the effort and money expended in developing the information, and (vi) the ease or difficulty with which the information could be properly acquired or duplicated by others.  See Liebert Corp. v. Mazur, 357 Ill.App.3d 265 (1st Dist. 2005).

There are a number of benefits to trade secret protection under ITSA.  One such benefit is the ease of obtaining injunctive relief to prevent actual or threatened misappropriation of information.  Additionally, ITSA allows for an award of damages measured in terms of reasonable royalty for the unauthorized disclosure/use of a trade secret.  Such an award is significant if one cannot demonstrate actual damages or unjust enrichment resulting from the misappropriation.  Finally, unlike other forms of IP protection, like patents, trade secrets remain protectable indefinitely, e.g., Coca-Cola’s secret formula.

How to Protect Trade Secrets

Regardless of whether a trade secret qualifies for the extra protection of ITSA, there are a number of measures a company can employ to generally help protect its trade secrets.  These measures include:

• Written confidentiality policy — at minimum, the policy should: (i) define exactly what information is confidential, (ii) state that all confidential information is the company’s property, (iii) provide a procedure for returning any confidential information at employee’s termination, and (iv) require an employee signature acknowledging the receipt of confidentiality policy and acceptance of its terms.
• Limited access to physical and electronic confidential information — any given employee should only have access to the information needed to perform his duties (e.g. one’s secretary, salesperson, and financial manager each work with different sets of information, and do not necessarily need access to all the company’s confidential information). For physical information, use locks, security codes, “confidential information” labels, etc.  For electronic information, use passwords on computers and specific files, limited networks, etc.
• Post-employment restrictive covenant — separate agreement for key employees to sign at termination.  The signed agreement should acknowledge that (i) employee returned all confidential information to company upon termination, and (ii) employee has a continuing obligation to keep trade secrets confidential.
• Preservation of employee’s computer activity in months leading up to termination — this includes emails, files on the hard drive, etc.

In Conclusion

Trade secrets are only valuable so long as they remain secret.  While laws like ITSA provide trade secret owners with a certain degree of protection, they can not undue damage that has already been done.  For this reason, it is extremely important to take preventative measures to protect one’s trade secrets.

If you have any questions regarding the protection of trade secrets, please call one of our experienced attorneys at Acumen Law Group.

Authored by Dominika Szreder Fard, Esq.