Shh! Protecting Your Company by Keeping It a Trade Secret

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This week, Jawbone won a preliminary injunction against Fitbit in litigation claiming that five former Jawbone employees had stolen confidential information when they left to join Fitbit.The former Jawbone employees who now work at Fitbit were ordered to return the allegedly stolen confidential information and expunge the information from their computers.

The recent news seems to be filled with similar stories about competing technology companies engaged in high-stakes litigation over trade secrets. This might lead us to think that trade secrets are reserved for big technology companies. However, a business of any size in any industry can possess valuable trade secrets worth protecting.

What is a trade secret?
Trade secrets are not just for technology and manufacturing companies. Under the Oregon Uniform Trade Secrets Act, a trade secret is defined as “information . . . that: (a) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” In plain English, this generally means that a trade secret in Oregon could be just about anything that contains confidential or proprietary business informationbut only if it adds value to your businessandyou have taken reasonable steps to keep it secret. Recognized trade secrets in Oregon include customer lists, business methods, sales records, marketing plans, production techniques, sales records, and so on, although this could differ in a situation where only the federal Uniform Trade Secrets Act applies.

Does my company have any trade secrets?
Whether or not your company has any trade secrets depends on the circumstances. Secrecy is the key element shared by all trade secrets. For example, not all customer lists in Oregon are treated as trade secrets. Your company may have a customer list but it may not count as a trade secret if it is the same one that your competitors use (i.e., your competitors already know this information) or if you have proudly published it on your company website (i.e., you have not kept it a secret). In reviewing your company’s business information, you will need to assess whether it meets the legal definitionof a trade secret. The more effort your company made to procure the information, the more difficult it is to obtain or recreate it, and the more valuable it would be to a competitor if it acquired the information, the more likely it will be treated as a trade secret.

How do I protect my company’s trade secrets?
The law requires you to make reasonable efforts to maintain the secrecy of your trade secrets, but it does not require absolute secrecy. What is needed depends on the particular circumstances of your company and the trade secrets at stake. Typically, a company will utilize both contractual agreements and physical security precautions. For example, your company might include a confidentiality policy in its employee handbook, require non-disclosure agreements before anyone is given access to any trade secrets, physically secure confidential business information in locked file cabinets or on a password-protected computer with access restricted to employees on a need-to-know basis, post security guards,or physically screen employees at the end of their shifts. The types of measures implemented will depend on the nature of your business and what your company is trying to protect.

Will trade secret protection last forever?
Perhaps.The Coca-Cola recipe is probably the most famous trade secret, and the Coca-Cola Company has managed to keep it that way since 1886 by making sure that only a few people know the recipe,while storing the physical recipe in a vault at its museum. Confidential business information will lose trade secret protection once it becomes generally known to the public or to competitors, so you could have a trade secret today but not next year if a competitor reverse-engineers or independently discovers the same information without employing improper means.

What protection do I get for my trade secrets?
The law prohibits misappropriation of trade secrets. In Oregon, there are four categories of misappropriation for acquisition by improper means, disclosure or use by someone who improperly acquired it, disclosure or use by someone who knows the trade secret was acquired by accident or mistake, and disclosure or use by someone who knows the trade secret came from someone with a duty to preserve its secrecy or limit its use. Liability may fall on the person who misappropriated the trade secret, as well as the person who received it.

Where a trade secret was misappropriated, acourt may order an injunction to stop the disclosure of its trade secret and damages adequate to compensate for the misappropriation. An award of damages can include the amount of actual loss suffered, unjust enrichment not less than a reasonable royalty, punitive damages for willful or malicious misappropriation, and attorney fees.

A trade secret can be a company’s most valuable asset. Where would the Coca-Cola Company be today without its secret recipe? By taking proactive steps to identify and protect your trade secrets now, a company can maintain its competitive advantage and save itself a lot of grief later on.

Josephine Ko is an attorney at Barran Liebman LLP where she represents employers across Oregon in employment law matters. Contact her at 503-276-2102 or jko@barran.com.

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Josephine Ko Attorney of Barran Liebman LLP

Josephine Ko is an attorney at Barran Liebman LLP where she represents employers across Oregon and California in employment law matters. Contact her at 503-276-2102 or jko@barran.com

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