Safeguard Your Competitive Edge – Trade Secrets and IP

Know Your Law

By Gregg M. Mielke, Attorney at Law

The following is provided for informational purposes only and is not, nor should it be construed as legal advice.

Intellectual property (“IP”) can consist of both publicly disclosed items such as trademarks, logos, and copyrighted works (“Public IP”), as well as undisclosed information which is confidential, can be legally protected, and gives your company a competitive edge (“Trade Secrets”).

We are all aware of the Public IP of major companies. From the “Just Do it!” of Nike, and Apple’s “Think Different” to State Farm’s “Like a Good Neighbor, State Farm is There” and the United States Marine Corps “The Few, The Proud, The Marines”, these define the entity and have great value. Many smaller companies develop a tagline or slogan to distinguish their business as well and use social media to boost their brand and level the playing field with big competitors that have larger advertising budgets. Connecting with your target audience in the social web is effective, but also makes it very easy to lose control of anything you consider proprietary. You can use your slogan or tagline without any need to formally protect them, but if you want to keep others from using them, you should trademark them.

Trade Secrets can be a complex formula, manufacturing process, method or technique, or can be as simple as a compilation, estimating technique, a process to solve a problem or accomplish a task, or even a pricing list or customer list. You don’t need to be a food purveyor or a mega-corporation to have a unique approach that sets you apart from your competition—and if you can legally keep it a secret, you should. Unlike trademarked and copyrighted Public IP, the value of Trade Secrets is that no one else knows them. Some of the most famous examples of Trade Secrets involve recipes: the formula for Coca Cola, McDonald’s Big Mac “secret sauce”, or that Mrs. Field’s chocolate chip cookie recipe that caused such a legal stir in the 90s.

Often these Trade Secrets have been created or obtained at great cost and effort, but they can be lost quickly through carelessness or error. Once the “cat is out of the bag” it cannot be put back in. So, take a minute to learn a few things you can do to avoid common mistakes many smaller businesses make with their IP, before you rush out to tweet information or share pics of your new logo, slogan or tagline you spent many nights dreaming up on Instagram.

1. Make a list: The first step in protecting Trade Secrets is knowing that you have them and what they are. Look across your business and think about any types of information you possess that are both confidential and critical to your success. Trade Secrets could be product designs, customer lists, marketing plans, sales forecasts, or processes. For software developers, proprietary code obviously needs protection and for restaurants and food stores, it’s the secret recipe. Identify the information you have a legal right to keep private and wouldn’t want your competitors to find out. If it is something that needs to be disclosed, think through what you want to disclose and whether you have taken the right protective steps to register or claim it as a branded Public IP. It’s important to remember that when you tell your customers something, you’re telling your competitors too. Make sure you have both a confidentiality and social media policy in place. Your policies must take Trade Secrets and Public IP into account and clearly state the ways in which your information, content, images and logos may and may not be used.

2. Stake your claim: Once you know what your Trade Secrets are, it’s essential to start treating them like secrets. Stamp or watermark “confidential” on sensitive documents. Get confidentiality and non-disclosure agreements in place with employees and vendors. These will put the people who learn your secrets on notice not to usurp them and lay the basis for a legal claim, if necessary. With respect to items that are Public IP, consider filing trademark or trade name applications for the proprietary names or logos you’ll be sharing that are critical to your brand. While it’s certainly not essential to register every word you write or every image you use, socializing a compelling motto or a trendy logo without protecting it first can be a risk. It may go on your competitor’s next product– and there will be little you can do about it. If you must put your IP in the public, registration heightens your chances of prevailing if you need to ask a third party to cease and desist from using it and – importantly – being able to recover damages against the party infringing on your Public IP.

3. Take Action:

A. For Public IP Display the Proper Ownership Marks: Most of us are so accustomed to seeing those little superscript marks next to brands, logos and content, that we hardly notice them. But these tiny icons can have a big impact on your ability to protect IP from infringement and abuse. For the protections to apply, it’s important to use the right kind of mark for the given situation. For trade names and logos, use the symbol ™ if you claim ownership but either have not filed an application or have filed and are waiting on approval. Only use the ® symbol if you have an approved and unexpired trademark or tradename registration on file with the U.S. patent and trademark office. For your original written content, you can use a © symbol whether or not you have filed a copyright application.

B. For Trade Secrets

  1. Lock Them Down. Take whatever steps are reasonably available to you to secure your trade secrets from access. Digital files and systems should be encrypted and password protected. Physical files should be kept locked. Establish rules around access to sensitive files. If possible, use a badge system to control access to your facility and posted signs to designate areas where access is controlled. Part of the requirement to have a protectable Trade Secret under the Uniform Trade Secrets Act is that you have taken “efforts that are reasonable under the circumstances to maintain its secrecy”. If you don’t protect it, neither will the courts.
  2. Train your Troops. Many disclosures of Trade Secrets are inadvertent slips by an employee who simply did not know better. That may make it easier to forgive, but the negative impacts on your business are still there. Prevent this with good training and education for your employees on what your company considers confidential and what employees’ obligations are. Back the training up with strong written policies. And when an employee leaves, remind them of their obligation to keep your Trade Secrets confidential, have them return all media that could contain Trade Secrets, and take steps to shut down their access to your files and systems right away to ensure that your secrets don’t leave with them.

Whether your Trade Secret is a treasured family recipe, a brilliant string of code, or a closely guarded customer list, it won’t be a secret for long unless you are careful. Taking the steps above is a great first step toward a solid trade secret strategy.

Gregg M. Mielke is admitted to practice before all Texas courts and the Federal Courts for the Southern District of Texas and the Fifth Circuit Court of Appeals. He is a fellow member of the College of the State Bar of Texas and has been practicing for over 30 years concentrating his practice in the areas of business formation and operations, construction and commercial real estate. Mr. Mielke is a Member of the firm, Currin, Wuest, Mielke, Paul & Knapp, PLLC (“CWMPK”) located at 800 Rockmead, Suite 220, Kingwood, Texas. In addition to the areas in which Mr. Mielke practices, attorneys at CWMPK concentrate their practice in areas of estate planning, probate, family law (including divorce and custody issues), employment law, bankruptcy, and commercial litigation. For more information, please call 281.359.0100 or see the CWMPK website at www.cwmpk.com.