Monday, July 18, 2011

How Do You Protect Trade Secrets?

Dear Rich: How are trade secrets made official? Do you have to have someone sign a NDA? NDAs won’t protect just any business information; the information must qualify as a trade secret. To qualify, the info you're trying to protect must not be generally known or ascertainable through legal methods and must provide you with a competitive advantage or have economic value. In some ways, trade secrets are like tamagotchis -- remember those little creatures from Japan that needed constant digital tending or they would pass on. If you have a trade secret, you must always conceal it, disclosing it only to those bound to maintain confidentiality. An NDA helps to conceal a secret because it is an agreement promising to keep a secret. If broken, the agreement provides remedies against the discloser. Other advantages of using an NDA are:

  • It places the party receiving the information on notice that you consider the information confidential. 
  • It specifies what information is defined as confidential, which helps prevent misunderstandings and resolve disputes.
  • It can establish a method for resolving disputes—for example, mandating that the parties arbitrate any disputes instead of going to court.
  • It can guarantee that any dispute will be decided in your geographic area.
  • It can establish which state’s laws will govern disputes. For example, if you are entering into an agreement with a company in another state, you may prefer to have disputes resolved under your state’s trade secret laws rather than the laws of the other party’s state.
  • In some cases, you may have a longer period of time to file a lawsuit than if you did not have a signed agreement.
There are many decent NDAs available on the web but we prefer the ones posted by the Dear Rich Staff  at this website