Many manufacturing companies recognize the importance of protecting their intellectual property (IP) to maintain a competitive edge in the industry. Patents and trade secrets safeguard valuable innovations and information, but these two legal protections are very different in scope and application.
Principally, patents only protect inventions while trade secrets can protect any important information. Further, patent protection requires disclosure of the invention in exchange for a monopoly for a limited period of time—generally, 20 years from the filing date of the patent application. In contrast,
trade secret protection requires the information to remain secret, and protection can last indefinitely, so long as the secret is maintained.
In view of these different forms of protection, companies should develop a framework for determining which legal mechanism is best suited for a particular IP asset. That framework should include creating a culture of protection and loyalty, where every employee understands the importance of protecting the company’s IP, and especially guarding its trade secrets.
The Role of Trade Secrets
Patents are often considered the leading form of IP protection, but trade secret protection may be a viable alternative when the company does not want to disclose details of an invention, as required to file a patent application, or when the information is not eligible for patent protection.
Trade secret law protects any type of confidential information that provides a competitive edge, including formulas, devices, processes, business plans, manufacturing methods, client lists, marketing plans or any other information or strategy that produces economic value. Some famous examples include the Coca-Cola formula, the Google search algorithm and the methodology for compiling the New York Times bestseller list.
To be protected as a trade secret, (1) the information must be a secret, (2) the information must provide commercial value and competitive advantage because it is secret, and (3) the company or owner must show that it made a reasonable effort to keep the information secret.
Creating a Culture of Protection
To mitigate the risk of trade secret misappropriation by employees, which can occur inadvertently or deliberately, it is critical for companies to cultivate a culture of information protection.
This culture should be built on policies and procedures that:
Do a trade secret audit to identify and classify all sensitive and confidential information, marking documents accordingly and restricting digital and physical access to this information to employees on a “need to know” basis.
- Carefully handle trade secret documents, such as by using a central server for document management and requiring employees to save to this server rather than to their laptops. Limit printing of documents, and have a detailed process for shredding and disposing of copies.
- Restrict the types of devices that can be used in areas that house sensitive information.
- Require new employees to sign confidentiality agreements and fully inform them of their obligations under these agreements.
- Reinforce these policies and the importance of confidentiality in the employee handbook.
- Provide comprehensive training on IP protection, emphasizing the importance of not violating IP laws, either against the company or against competitors and past employers.
- Sequester conversations about confidential information to closed-door meetings, and confirm that attendees have been approved to participate in the conversation.
- Reward employees who identify trade secrets, who find weaknesses in existing security measures, and who create methods for protecting information.
- Deal quickly and appropriately with breaches of confidential information.
- Conduct thorough and intentional exit interviews, reminding employees as they leave of their legal obligations to protect the company’s trade secrets.
Lastly, one of the most meaningful steps an organization can take to build trust and create a culture of protection is to honor the trade secrets and IP of other companies. This demonstrates to employees the priority your company places on IP protection and its unwillingness to engage in trade secret misappropriation or other forms of IP infringement.