Protecting Trade Secrets

protecting trade secrets

Protecting intellectual property is not just an issue for large companies who can incur the expense of filing registrations with federal patent, copyright and trademark offices. Most small businesses have confidential information that may qualify as a trade secret. Trade secrets are protected by maintaining the data’s secrecy, not by registration with a governmental agency. Trade secrets may include a wide variety of confidential business data such as customer information, cost and pricing information, product designs, software, sensitive marketing information, business processes and sales forecasts, among other data.

Trade secrets are generally defined as any information that is unique and valuable to your business and isn’t known to people outside of your business. Michigan law protects confidential data that qualifies as trade secrets from third party theft or misappropriation. However, a business may not claim misappropriation of a trade secret unless they take steps to keep the information a secret. Some steps a small business can take to protect their trade secrets include:

Sharing trade secrets on a “need to know” basis only. Only share trade secrets with partners, customers, suppliers, and employees on a “need to know basis.” Don’t post information on social media or your website that you want to protect as a trade secret.

Confidentiality agreements. When sharing sensitive information, have the recipient sign an appropriate confidentiality agreement at the start of the relationship.

Employee protections. Include confidentiality provisions in employment agreements. Consider having the employee sign a non-competition agreement to discourage departing employees from using trade secrets in independent ventures or in subsequent employment.
Restricting Access. Protect trade secrets by securing physical data in locked drawers, password protecting electronic data in computers, and labeling all sensitive data as confidential, among other measures.

Strong Policies and procedures. Maintain an internal written policy on what data is confidential and how confidential data should be treated, such as not leaving out in plain sight, not discussing in public places, etc. Have a procedure for departing employees to protect trade secrets such as securing electronic devices prior to departure and requiring a review and return of all confidential data.

The above steps are some you could take to increase your chances that the law will protect your data as trade secrets. Consult with legal counsel if you are unsure what data qualifies as a trade secret or how to protect your trade secrets in your given situation. In addition, legal counsel can assist you in drafting contracts, policies, and procedures to protect your trade secrets.
* * *

The Reason Your Lawyer Loves a Fight: What Every Client Should Know
By Gayle McGregor ©2015

Lawyers love a fight. It is a lawyerly trait I like to call “Infightuation.” This probably doesn’t come as a surprise to those of you who know any lawyers. What can be a surprise, though, is how infightuation can impact the course of your legal transaction or litigation.

I began my legal practice in a large, silk-stocking law firm, followed by years in corporate legal departments. It was my experience in a law firm that lawyers rarely engaged in cost-benefit analyses of legal matters from the perspective of their clients. The analysis, when done, typically regarded the lawyer’s perspective of the clients’ ability to pay for services, or the likelihood litigation will result in a lucrative settlement. That is, unless clients direct the conversation to their own costs and benefits. The problem for clients is they often don’t know what they do not know and are completely at the mercy of their lawyers to advise and direct the legal strategy. It wasn’t until I went to work in a corporate legal department that I learned to engage in this important cost-benefit analysis of every legal strategy. And even in the corporate setting, it was difficult at times to bring the business folks along, because lawyers aren’t the only professionals who suffer from infightuation.

How does this affect your transaction or litigation? Let me give a real-life example. A few years ago, at the onset of the Great Recession, I represented a financial institution in negotiations with a commercial real estate borrower. Early in the negotiations and before litigation commenced, the borrower made a settlement offer involving the short sale of the property (ready buyer in the wings) and a lump sum payment on the personal guaranty that amounted to a write-off for the lender of $100,000. The lender rejected the settlement offer and had the lawyers file suit. The litigation was slow and involved discovery of documents and depositions, as it always does. Prior to the bank obtaining a judgment against the borrower, the buyer of the property got tired of waiting and decided there was a better deal on other property elsewhere. Fortunately, the borrower was able to find another buyer, but at a lower price, as the real estate market was in sharp decline. The lender and borrower finally ended up settling the matter many months later for the same lump sum on the personal guaranty, but with a lower sale price on the property. Plus, the lender had incurred over $20,000 in legal fees in pursuing court action. All said, the lender’s loss had grown from the initial $100,000 to almost $200,000. Clearly, the lender’s financial position deteriorated under the legal strategy of taking the borrower to court. So why did the lender choose that course of action? The lending officer admitted, “management needs to feel like it fought hard for the deal before it agrees to settle.”

Unfortunately, the infightuation trait is not unique to lawyers and bankers. I’ve also represented business owners in transactions with other business owners who would just as soon sue their counterpart for breach of contract than resolve their dispute by making an immaterial concession to the other side. There is only one reason for this – ego. People become emotional and competitive in their transactions and cannot separate these feelings from good, rational business decisions. Many lawyers love when this happens because they also like to fight, and they make more money in fees when the parties are not coming to terms.

So, what is a consumer of legal services supposed to do? Be aware. Ask your attorney to explain to you the costs, benefits and risks of every legal strategy being proposed. Then, check your own emotions and watch how your attorney deals with your emotions. Does the attorney play off your emotionality, or does the attorney remain calm and maintain the rationality necessary for good judgment? Will your attorney provide business consultation in the deal, in addition to legal advice, or does your attorney limit his or her role to merely following your directions without giving sound consultation? And finally, and most importantly: is your attorney trustworthy? If you pay attention to these dynamics, you may conclude your attorney suffers from infightuation. If that’s the case, you most assuredly are incurring unnecessary legal expenses.

Scroll to Top