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How To Identify & Protect Your Trade Secrets


They're the lifeblood of your small business, so do you have them properly secured?

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If your business is successful, then it has trade secrets to protect. Experienced small business owners realize that while their "trade secrets" may not be material, they are, in fact, their most valuable asset.

What Are Trade Secrets?

The term "trade secret" encompasses any secret information that qualifies as intellectual property, often protected by law. A method, formula, device, process or any other information that is generally unknown and kept secret to give your business a competitive advantage might qualify as a trade secret.

Examples of Common Types of Trade Secrets

  • Business methods
  • Business plans
  • Business forecasts
  • Market analyses
  • Marketing plans
  • R & D information
  • Business relationships
  • Product information
  • Pricing information
  • Financial information
  • Profit margin information
  • Overhead information
  • Cost information
  • Purchasing information
  • Personnel information
  • Office techniques
  • Manuals
  • Notebooks
  • Computer programs
  • Computer databases
  • Calculations & processes in computer programs
  • Data compilations
  • Inventions
  • Designs
  • Patterns
  • Drawings
  • Blue prints
  • Maps
  • Formulas
  • Ingredients
  • Devices
  • Methods
  • Machine processes
  • Manufacturing techniques
  • Manufacturing methods
  • Repair techniques
  • Repair methods
  • Processes
  • Systems


Unfortunately, despite the importance of maintaining trade secrets, businesses can be lax in protecting them — partly because business owners fail to recognize what their trade secrets actually are or that they have them at all. Your firm's counsel, either in-house or outside, needs to be familiar with these laws and codes and how they are implemented in your state.

Many business owners simply overlook important intangible assets, failing to recognize their value. And that's understandable – intangible assets are the ones Webster's Dictionary would label "not material, not clear to the mind, vague and elusive."

What's more, while patents, copyrights and trademarks are publicly recognized or registered by the government, trade secrets are not. Yet often, the trade secrets of a business are worth more than all of its patents, copyrights and trademarks together.

If you believe your business might need to step up its game regarding the protection of trade secrets, there are three important legislative documents to be familiar with:

In some businesses, intangible assets in the form of trade secrets may be more valuable
than the tangible assets, including inventories and equipment.

How To Protect Your Trade Secrets [8 Tips]

A written document outlining your company's policy regarding trade secret protection will emphasize your commitment to keeping such information confidential and guide both employees and contractors in identifying and protecting your trade secrets. Such a document will also be an asset should you become a party in litigation.

In addition, you will want to consider the following advice:


Tip #1

Isolate important trade secrets in a separate and secure location, controlled by a small number of employees who have restricted access to such information in accordance with company policy.


Tip #2

Mark any confidential material with a warning label indicating it is a confidential trade secret, the trade secret's owner, and that disclosure is prohibited.


Tip #3

Be careful not to reveal confidential information during sales presentations or when interviewing prospective employees and contractors.


Tip #4

Limit access to your company's trade secrets to as small a number of people as possible, making sure those to whom sensitive information is disclosed have a legitimate "need to know."


Tip #5

Be cautious when dealing with third parties and always require signed confidentiality agreements before revealing any of your company's trade secrets.


Tip #6

Be particularly aware of what visitors may hear or see when touring your business facility.


Tip #7

Monitor the copying and/or removal of confidential documents or data.


Tip #8

Get signed confidentiality agreements from all employees whose work will require them to have access to your trade secrets.

A Word of Warning: The Biggest Threat to Your Trade Secrets is Internal

Careless employees who inadvertently reveal trade secrets (and dishonest employees who do so for personal gain) perhaps represent the greatest danger to your trade secrets. It's therefore extremely important to go over your company's trade secret protection policy with employees before they are hired, from time to time while they are employed, and again when their employment ends.

Remind them of their obligation and commitment to keep all of the company's trade secrets confidential and point out the possible legal consequences if they don't.

What a rude awakening it is to discover that another business or ex-employee is using your process or other business knowledge to compete with you. And if you don't take proper steps to protect your trade secrets, you may find that you really don't own something you thought you did.

The Takeaway

The message is clear:

Business owners must recognize the value of their intangible assets and take the steps necessary
to assure ownership and protect them from unauthorized use as soon as is possible.

What could be more important than a competitive advantage maintained by keeping your company's trade secrets safely out of your competitors' hands?

Using MaxFilings' online incorporation service, you can securely incorporate your business right away... or just start organizing all your information in one place until you're ready!