5 Tools Small Businesses Can Use to Protect Their Trade Secrets

by Luca Hickman

When many entrepreneurs think of trade secrets, they think of high-tech companies or large manufacturers. But all businesses – even the most “simple” – have trade secrets. At the very least, all businesses have customer lists, vendor lists, profitability/pricing information, etc. – with many businesses having much more. “The best way to evaluate whether certain information might be a trade secret is to think about real-world business consequences,” explained Luca Hickman, a patent and trademark attorney at Henderson, Franklin, Starnes & Holt, P.A. in Naples. “Imagine if one of your best employees left for a competitor and took certain business information with them. It that could hurt your business, such information should be protected as a trade secret.” Whether your business is large or small, below are five important tools that can be used to protect trade secrets.

1. Non-Disclosure Agreements
A non-disclosure agreement (“NDA”) is a contract between two or more parties keep certain information confidential. In a small-business context, non-disclosure agreements can be used to maintain the secrecy of important business information shared with employees or independent contractors. “By using an NDA, you can contractually obligate associates to maintain confidential information. This is an especially important tool for outside contractors who may have active relationships with your competitors.” Hickman explained.

2. Employee Handbooks
An employee handbook is an important part of managing employees, setting employee expectations and protecting a small business from various employment-related legal issues. Employee handbooks can also be useful legal tools for maintaining confidential information during the scope of an employee’s relationship with a small business. “Small businesses should consider having an attorney prepare confidentiality-related language in their employee handbooks.” Hickman opined.

3. Mandatory Exit Interviews
Today, multiple career transitions are the norm, and small businesses should anticipate this in their dealings with employees and contractors. “Employment and independent contractor agreements can include a provision requiring an exit interview.” Hickman explained. “During the exit interview, a business should remind exiting employees of their confidentiality obligations.”

4. Fragment Confidential Material
Another tool for maintaining trade secrets is fragmenting confidential material. “Fragmenting trade secrets means dividing confidential information amongst various employees or contractors so that none of them have access to the whole. In other words, no one in the business other than a select group – usually the owners – know all the ‘ingredients’ in the ‘secret sauce’ that makes the business work.” Hickman explained.

5. Restrict Access to Confidential Material
One last tool for maintaining trade secrets is restricting access to confidential material on a need-to-know basis. “One of the best examples of this is the division between sales and manufacturing.” Hickman said. “Often, the sales team does not need full access to confidential information about how a product is manufactured, who supplies raw material, etc. Rather, salespersons only need enough information to sell the product.” Hickman explained.

Those needing assistance with patents, trademarks or copyrights matters may contact Luca Hickman at luca.hickman@henlaw.com or by phone at 239-344-1307.