In the U.S., about 34.8 million small businesses exist, comprising 99.9% of all businesses, and women hold majority ownership of 39.4% of them. Gen X owns 49% of US small businesses, followed by Baby Boomers at 30% and millennials at 21%.
Business has long been a competitive trade. And ironically, one secret to the success of these businesses is their trade secrets. These are the secret formulas and manufacturing processes for customer lists and marketing strategies. They are valuable assets that require legal protection.
Trade secret laws are essential for business owners to safeguard their assets. It helps them prevent theft or misappropriation and maintain a competitive edge.
Let’s learn more about trade secret laws that every business owner should know.
Understanding What Qualifies as a Trade Secret
What makes a trade secret so valuable? It consists of the information that bestows a competitive edge upon a certain business. These could be anything from formulas, practices, or processes whose operation is not known to mankind.
Business lawyers can protect these assets. They can help draft and enforce non-disclosure agreements and guide you on proper procedures to maintain confidentiality. They also provide legal strategies to address misappropriation or theft of trade secrets. Your attorney will make sure you have the proper paperwork and are following all rules and regulations, says business law lawyer Sean Refahiat.
To be considered a trade secret, it must be kept confidential and give the business some advantage. Think of it as your secret recipe or your unique marketing strategy. If everyone knows how to manufacture a similar product or render a similar service, its value diminishes.
You should always be mindful of protecting this information. Limiting access to it and using non-disclosure agreements are two effective methods for safeguarding your trade secrets.
In learning exactly what constitutes a trade secret, your company is going to be in safe waters and it will cultivate a team spirit that cares much for innovativeness, loyalty to the cause, and commitment.
Legal Framework Governing Trade Secrets
While you may have valuable trade secrets, understanding the law surrounding them is perhaps even more critical to conserving your rightful interest. In the U.S., the strongest trade secret law is the Uniform Trade Secrets Act (UTSA), which has been adopted by almost every state.
This law states what constitutes a trade secret and provides for remedies should misappropriation occur. Also, you have the option of harnessing federal protection under the Defend Trade Secrets Act (DTSA) so as to sue in federal court.
These laws do help you protect your secrets, but they also require that you make active efforts to keep them secret. Knowledge of these laws will allow you to comprehend your possible problems and build an atmosphere whereby the community of trust holds your business’s most sensitive information.
Steps to Protect Your Trade Secrets
Understanding trade secret laws is only the initial step; the real difficulty lies in protecting your valuable information. First, you need to identify what your trade secret is in your company.
Once you’ve established this, you can put a confidentiality agreement in place for the employees and partners. This way, they will understand how critical it is to protect the information. Conduct training sessions regularly about the best practices of information security so that employees internalize their responsibility in safeguarding trade secret assets.
Lock up physical trade secret information, such as storing secret formulas in filing cabinets with controlled access, or restrict entry with a security system. Maintain strict oversight over your trade secrets and actively work to resolve any anticipated breach of their secrecy.
Promotion of a culture supporting confidentiality will develop into a strong society appreciative of and safeguarding the uniqueness of your business.
Consequences of Trade Secret Theft
When a trade secret is stolen, it is always detrimental to the business. It might lose its competitive advantage; thus, sales and revenues will also go down. Customers might begin looking for competitors since they now have the secret, and the spirit of trust amongst the staff might evaporate, setting in fear and uncertainty.
The employees may begin doubting their jobs and start seeking alternatives elsewhere. Management views on handling the aftermath could also take time away from focusing on development.
Your brand equity could go downhill late in the process, making it hard for new customers and talents to come in. In the long run, having your trade secrets guarded is essential in creating a close-knit business culture.
Legal Remedies for Trade Secret Violations
Legal remedies are vital for business owners in protecting their proprietary trade secret information. When there is a trade secret breach, these remedies are available. You might want to first apply for an injunction.
It will stop the wrongdoer from using or disclosing your trade secrets. Another possibility is damages. You may recover damages for any lost profits of yours or any unjust enrichment the violator obtained.
In some instances, you may even try for punitive damages if the trade secret violation was willful and malicious. Also, for some hardcore theft, the wrongdoer might even be pursued criminally.
Knowing all of these solutions gives people real power and creates a group of business owners whose goal is to be valued for their new ideas and hard work.
