Do you manufacture products in one state and sell them in another? Perhaps you operate sales offices in Atlanta, New York, Los Angeles and Seattle. How do companies stay competitive without getting overshadowed by something bigger or better? The Uniform Trade Secrets Act (UTSA) gives business owners a certain degree of protection when it comes to market strategy.
What Is a Trade Secret?
Broadly speaking, a trade secret is confidential information with commercial value. It’s a form of intellectual property by which a company gains an advantage over its competitors. A trade secret may be a technique, pattern, formula, practice, compilation, device, method, process or program. Consider the following examples:
- Manufacturing technique
- Supplier list
- Client list
- Consumer profile
- Sales method
- Advertising strategy
This type of information is usually hidden from the public. The benefits derive from secrecy, as well as the value of the information.
Uniform Trade Secrets Act
Unlike federally regulated patents, trade secrets are governed at the state level. However, many businesses work with customers and clients all over the country. The Uniform Trade Secrets Act went into effect in 1979 to protect companies that conduct business in multiple states. This common law has been adopted nationwide, with the exception of New York, Massachusetts and North Carolina. The primary goal of the UTSA is to prevent misappropriation by improper means. In other words, the act makes it illegal to acquire or disclose another company’s trade secrets through theft, breach, bribery or misrepresentation.
Implementation
Every entrepreneur and new business owner should have a game. What is your product or service? Where is the demand? What financial, operational and marketing strategies will you implement to make your company profitable? A formal business plan is crucial to success, but you won’t be able to obtain that economic edge if someone else copies all of your ideas.
Suppose that you operate a Seattle-based catering service with additional dispatch offices in Portland, Oregon, and Northern California. Sales figures are positive, and your customer profile is expanding. If you want to protect your strategy and trade secrets under the UTSA, your business plan should include three main elements:
- Information: Supplier lists, food recipes and dispatch routes are examples of hard data. You can also protect soft information, such as your growth strategy, marketing plan or pricing structure.
- Value: In order to be protected as a trade secret, your information must give you some type of benefit or advantage. In other words, you’d be at risk if another company were to copy your business model. Valuable information may tell you what works or what doesn’t work. However, public knowledge is not considered a trade secret. Likewise, readily ascertainable data holds no value under the UTSA. A customer list, for example, is not protected if it simply lists names and phone numbers. Conversely, a customer list that details each client’s food preferences would be considered a valuable trade secret.
- Secrecy: You must make a reasonable effort to protect your private information. Non-disclosure agreements, locked filing cabinets, IT security and reporting structures are all considered reasonable measures. If you publish one of your recipes on your company blog, for example, your catering menu is no longer a protected trade secret.
Filing a Claim
By law, you have the right to file a claim against any party that attempts to misappropriate your company’s private information. A court may impose an injunction against the offender or require the party to pay you a royalty fee. You may also be entitled to monetary compensation to cover your actual loss. If the act was malicious, the offender may be required to pay your legal fees and double the cost of the actual damage. If you’re considering filing a claim, be sure to contact an attorney who specializes in uniform commercial law.
Legal Disclaimer
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.