Among the most valuable assets companies have are their trade secrets. A trade secret is a “company specific” way a company manufactures a product, delivers a service, or uses information. Usually courts define a trade secret as:
Any formula, pattern, device or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it.
A trade secret is what gives a company a competitive advantage over other companies. Not only do trade secrets give companies an edge over their competitors, trade secrets are what make a company’s product or service unique and desirable to customers. Companies can and should protect their valuable trade secrets. Companies should do this by:
- Having employees sign confidentiality non-disclosure agreements;
- Having employees sign non-compete agreements; and
- Keeping computers, data, and property secure from third-parties.
Despite best efforts, sometimes trade secrets get disclosed and become the focal point of litigation. Some examples are:
- An employee takes secret information from company computers for non-company use.
- A competitor has somehow gotten a hold of and is using a company’s customer list – trade secret information – to gain an unfair advantage.
- A former employee breaches a non-compete and non-disclosure agreement, that includes a trade secret clause, when s/he enters starts competing in concert with a new employer.
In cases like these, an injunction is usually required on the front end of a lawsuit to contain the trade secret from further disclosure. After the preliminary heavy lifting of obtaining an injunction, one party will usually ask to see the other party’s trade secret information. However, a party does not automatically get this privilege. Rather, Courts try to balance the interests of each party.
First, a Court has to determine if a trade secret exists. A Court looks at the following factors:
- The extent to which the information is known outside of the business.
- The extent to which it is known by employees and others involved in the business.
- The extent of measures taken to guard the secrecy of the information.
- The value of the information to the business and to its competitors.
- The amount of effort or money expended in developing the information.
- The ease or difficulty with which the information could be properly acquired or duplicated by others.
Determining the need for a trade secret
Second, the Court determines whether the party asking for the trade secret information needs it in order to get a fair trial. Usually a party has to show that it needs the trade secret information in order to prove one or more of its claims. A party also has to show that the trade secret information is “necessary.”
Because Courts have to weigh and balance several factors, cases involving trade secrets are complicated and can be bet the company cases. Whether heading off a lawsuit by proactively protecting trade secrets or litigating a suit involving trade secrets, Mahendru P.C. offers knowledgeable and experienced advice in all matters concerning trade secrets.
An entrepreneur and businessman himself, Ashish Mahendru understands that getting an attorney involved in a dispute to formulate a business solution on the front end may avert litigation. He understands how legal disputes can affect your bottom line and will work closely with you to identify and implement strategies that protect your business interests. Contact or call the firm toll free at 866-558-8149 or 713-391-8247 to schedule a free initial consultation.