Protecting your information and preventing leaks
If your company’s unique formula, recipe, or manufacturing process sets you apart from everyone else on the market, you have a trade secret. Unfortunately, secrets are hard to keep.
We’re not talking intellectual property protected by patents and copyrights. Trade secrets are technical information that gives you an economic edge, or the potential for one, over the competition. These can be techniques, processes or formulas. Most companies take steps to protect themselves from patent and copyright infringement, but many mid-sized firms neglect to take steps to secure confidential and sensitive information, such as trade secrets, business strategies, financial records, customer data, and employee contracts terms.
All of these are valuable assets to your company and need to be safeguarded.
Where leaks occur
Sadly, research shows that employees are the biggest source of confidential information misappropriation. Attorneys at O’Melveny & Myers say 78 percent of cases between 1995 and 2009 involved defendants who were either employees or former employees. Third-party contractors and service providers were involved in 20 percent of those cases.
Ownership of trade secrets aren’t protected by law the same way patents and other intellectual property are. However, individuals and competitors can be sued in civil court under federal laws , such as the Economic Espionage and Computer Fraud and Abuse Acts.
The rise in trade secret litigation surpassed that of other trademark and other intellectual property infringement cases by double-digits in 2013, according to American Intellectual Property Law Association.
Taking steps toward protection
Chances of successfully proving legal ownership of confidential information and trade secrets improves drastically if you have taken reasonable steps of protection.
Protection begins at home. All employee and contractor agreements should include policies on non disclosure clauses for proprietary, secure, sensitive information. The best security is maintaining a strict need-to-know policy, sharing sensitive information only with those who have signed a nondisclosure agreement. All employees should be given intellectual property security training upon hire. It doesn’t hurt to update and review that training annually.
We encourage you to call one of our Sadler insurance experts at 800-622-7370 if you have questions about intellectual property and trade secrets. They’ll be happy to provide answers and discuss the insurance needs of your unique business.
Source: Matt Dunning, “Trade Secrets,” Business Insurance. 16 Mar. 2014