Lott & Fischer is an intellectual property law firm in Coral Gables, Florida. The firm concentrates its practice exclusively in intellectual property law, including U.S. and international patent, trademark, copyright, unfair competition, Internet, and entertainment law and related litigation.
Trade secrets exist in almost every business. Under the traditional, common-law definition, they consisted of virtually any information beneficial to the business, developed by the company through the expenditure of time and effort, unknown to others in competing businesses, and which gave an advantage to the company over such competition.
Under the recently enacted Florida Uniform Trade Secrets Act ("UTSA"), a trade secret is any information (including, but not limited to, formulae, patterns, compilations, programs, devices, methods, techniques, or processes) which meets two criteria:
(1) it derives "independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons" to whom it might be valuable; and
(2) it is subject to "efforts that are reasonable under the circumstances to maintain its secrecy."
According to the legislative history of the Florida UTSA, this new definition is intended to expand the scope of protectable trade secrets to allow a business to protect, due to its potential value, information which it does not presently intend to utilize or which it has not or cannot presently fully develop. In addition to information such as computer programs, formulae, and methods of production, trade secrets can also include customer lists, source lists, and the like.
If a company wishes to protect information as a trade secret, it must implement sound measures to protect against its disclosure. Under the common law, it was wise to do so not only in order to maintain competitive advantage, but also to bolster arguments of protectability should trade secret litigation become necessary. Under the UTSA, in order to even meet the threshold qualifications as a trade secret, information must be the "subject of efforts that are reasonable under the circumstances to maintain its secrecy."
II. Preliminary Considerations
A. Necessary Level of Security
Even under the common law prior to the enactment of the UTSA, courts would not protect the claimed trade secrets of a business which failed to take adequate precautions against unauthorized discovery. On the other hand, courts do not expect a business to turn itself into an "impenetrable fortress" as a prerequisite for relief against misappropriation of trade secrets.
As one court observed in a case involving a secret manufacturing process:
While absolute secrecy is not required, there must be a substantial element of secrecy so that a third person would have difficulty in acquiring the necessary information for manufacturing the product without resorting to the use of improper means of acquiring the secret.
Thus, "heroic measures" to preserve secrecy are not required. The Florida UTSA codifies the common law doctrine of "relative secrecy", requiring that a business owner make reasonable efforts under the circumstances to maintain secrecy.
For example, it has been held that despite escorted tours through a company's plant, adequate security measures were employed since the public was denied access to the particular area in which the machine containing trade secrets was located. Another example of measures deemed adequate included instructing employees as to the proprietary nature of machines, restricting escorted visitors' view of machines on plant tours by keeping them at a distance, and erecting screens and barriers during tours. Reasonable precautions may also consist of separating sensitive departments or processes from a central facility.
A court may excuse a minor lapse in security where no significant public disclosure of the secret has been shown to result from the lapse. In one case, a manufacturer's product was exhibited at a conference which was not attended by any competitors, and limited tours of the plant were given to competitors, who were not permitted to view the manufacturing operation. The court held that these occurrences did not destroy the secrecy of the manufacturer's techniques.
In another case, promotional materials were published which described secret production techniques in general terms which were insufficient to enable a reader to duplicate the techniques. This court held that this publication did not defeat the trade secret status of the process. In yet another case, the court upheld trade secret protection despite certain lapses. The product was displayed in a private hotel suite during a convention in a manner so that customers could not closely observe all trade secrets contained therein. Engineering samples were sold or given away for business purposes to customers whose business ethics required confidentiality. Also, a copyright registration was obtained for a service manual for the product, which was not considered to be industry-wide dissemination.
On the other hand, certain circumstances militate against the finding of adequate security measures. In one case, secretarial employees observed key departing employees carrying cartons of documents from the plant. This security lapse undermined trade secret protection. In another case, the inventor of a motorcycle modification permitted a modified motorcycle to be displayed at a service seminar of a major manufacturer, allowed a company to use a modified motorcycle as a demonstrator without restriction, and installed his modification on the motorcycles of nine individuals with minimal instructions not to reveal the modification to others. The court held that these actions constituted a failure to make reasonable efforts under the circumstances to maintain the modification as a trade secret.
B. Identifying Trade Secrets
Before taking protective security measures, a company must first identify its trade secrets. The threshold inquiry is the first of the two criteria in the definition in the Florida UTSA, discussed earlier in the "Introduction": namely any information which derives "independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons" to whom it might be valuable.
Once a company has identified its trade secrets, they must be subject to "efforts that are reasonable under the circumstances to maintain [their] secrecy" in order for courts to protect them. Therefore, the company must determine the appropriate measures for the protection of its various trade secrets, several alternatives for which are discussed below. By way of example, in the case of a proprietary supplier or vendor list, only one master index or file of these names should be maintained, and it should be kept in a locked compartment. It should be only available to employees on a "need-to-know" basis; duplications should not be allowed; and the index should be locked at all times unless in use, especially at night or when the custodial employee is away.
It is vital to specifically identify what matters are to be protected as trade secrets and to tailor security measures to protect only that information. If the security measures are overbroad, they often will become too burdensome to employ on a consistent basis. As discussed later, in section III.E. ("Policy Enforcement"), failure to employ security measures consistently can lead to loss of trade secret protection.
C. Security Officer
When the security policies are in place, a reliable security officer should be appointed to implement them. We recommend filling this position with a high level executive or employee.
First, the security officer must be knowledgeable of the company's inner workings and its trade secrets, and must be able to make accurate decisions regarding the secrecy and importance of trade secret materials. Second, the security officer must have the authority to command respect and enforce compliance with security measures.
Finally, the security officer and employees must know that top management will support the security officer's policies and decisions. If the security officer is countermanded, his or her confidence and authority will be undermined. Thus, it must be someone whose judgment is respected.
III. Plant/Office Security
There are several steps that can be taken to protect a company's trade secrets. Some suggested steps include the following, some of which are discussed in more detail in this section, and in Sections IV and V:
(i) employee confidentiality agreements;
(ii) prominent labeling or identification of documents or other items containing confidential materials;
(iii) limiting distribution of documents to a "need-to-know" or "need-to-use" basis;
(iv) numbering documents (when reasonable) and maintaining ledgers to track each copy;
(v) creating a document destruction program;
(vi) visitor control (registration, badging, supervision);
(vii) fencing premises;
(viii) limiting access to sensitive materials, by means of "locking" computer systems as well as sensitive areas, such as computer and document storage areas;
(ix) restricting photocopying (logs or central copying);
(x) reviewing all outgoing materials;
(xi) posting signs and periodically circulating reminders cautioning employees to protect confidential information;
(xii) having employees periodically acknowledge their duty to protect confidential information, perhaps during employee reviews; and
(xiii) exit interviews.
A. Physical Measures
Plant security includes fencing plant premises and monitoring points of access for employees, visitors, salespeople, vendors and freight. Entry to plant buildings should be restricted through the use of self-locking exterior doors and locks on interior doors which lead to areas containing secret material. Access to areas where trade secrets are in use, including offices where there are lists of vendors, suppliers, customers, etc. should be restricted as well. Design areas and manufacturing areas where trade secret processes are employed should be designated "RESTRICTED" and appropriate signs posted.
All employees must be made aware of restricted areas and of the regulations of the company for keeping those areas secure.
1. Restricting View
Interior areas in which trade secrets are in use should be hidden from view. This may be accomplished by placing shades on windows, or screens positioned near work areas.
If the value of the trade secret to the business so justifies, more stringent measures should be considered, such as guard dogs, intruder alarms, closed circuit surveillance television, night watchpeople and security guards.
B. Visitor Control
Visitor control is vital to security. No outsider should be allowed access to the offices or to the plant unescorted.
A VISITOR IS ANY NON-EMPLOYEE.
Limit the means of access to the plant and require every non-employee to check in with an employee, to proceed only when accompanied by an employee, to wear a "VISITOR" name tag and to sign in and out using a visitor's log.
This visitor's log should include name, address, affiliation, the person he came to see and the reason for the visit. Such a record may be significant later as an item of evidence establishing access to the secret.
Employees responsible for greeting visitors should check with particular care the credentials of plant visitors claiming to be equipment service people, telephone or utility employees, fire or building inspectors, union officials and even police officers. These are among the most common disguises used by investigators. The receptionist should explain that it is standard procedure to make a confirming telephone call before allowing access to the plant or offices. He or she should then telephone the authority from which the individual claims to have come, to determine whether or not an inspection or call was authorized and the name of the individual who is to be there.
CAUTION: DO NOT CALL A NUMBER PROVIDED BY THE INDIVIDUAL. CALL THE NUMBER LISTED IN THE TELEPHONE DIRECTORY OR PROVIDED BY DIRECTORY INFORMATION. IF THERE IS ANY DOUBT OR QUESTION, CALL THE COMPANY'S SECURITY OFFICER IMMEDIATELY FOR FOLLOW UP.
No one should be allowed in restricted areas without a visitor's badge, even if accompanied by an employee.
1. Employee Participation
As stated above, the company should appoint an officer or manager of the company as its head of security. This individual will take the responsibility for seeing that security policies are followed. The security officer should post appropriate signs and periodically circulate memoranda reminding employees of the company's security regulations.
It is important that employees be mindful of the security measures in effect and take them seriously. Surveillance by fellow employees can play an important role in maintaining plant security. In one of the cases discussed above, for example, secretarial personnel observed key departing employees carrying cartons of documents from the plant.
The company should consider using employee picture identification tags, if the operation is large enough to warrant this system. This is not necessary for companies having few employees, since a non-employee would instantly be recognized by most of the employees. There are a number of firms in the Miami area which manufacture employee I.D. and visitor tags. They are listed in the Yellow Pages under "Identification Card Service".
Employees should be particularly strict in implementing security rules and procedures with non-employees who are known to them, such as former employees, or salespeople, vendors, etc., who have done business with the company for years and whom they know well. These are the people most likely to be allowed access to trade secrets, and the people least likely to be stopped or challenged in the process. If it is explained that procedures are for everyone, and if no exceptions are made (i.e. even for executives' personal visitors), there will not likely be hard feelings.
Further, these procedures need not be imposed with an overbearing attitude. It is common courtesy to meet and escort any guest through one's place of business. Employees should stop unescorted non-employees and ask if they can help. The visitor should be escorted to the individual he or she came to see and not left until that individual is available to take over. If the employee cannot leave his or her work area, the security officer should be called to send an escort for the visitor.
Employees should know the company's security regulations and should actively participate in implementing them.
2. Group Tours
Most companies have occasion for group tours at some time or another. Whether it be in connection with a trade show, potential investors or the local Boy Scouts, visitors on group tours of the plant should be excluded from areas where trade secrets are visible.
The security officer should be aware of all such tours well in advance so that he or she can take appropriate precautions. Desks and secretarial areas should be checked to be certain that no trade secret information is left in view or is being worked on at the time of the visit.
If a restricted area must be visited, screens should be erected around equipment or products, or around the area in which employees are performing secret processes, to conceal them from view.
As with individual visitors, NO GROUP SHOULD EVER GO UNESCORTED THROUGH THE PLANT OR OFFICES.
C. Limiting Employee Knowledge
Ignorance is one of the best methods for protecting trade secrets. For that reason, trade secrets should be known only to those employees who need to know them. Other employees can be excluded from restricted areas, or denied access to restricted information.
When the duties of certain employees or non-employees (such as repair or delivery personnel) bring them into contact with trade secrets which they have no need to know, secrecy can be maintained by physical measures. For example, one company documented its secret manufacturing processes in code symbols contained in books, which were not fully intelligible unless the reader had access to the entire code, and which were distributed only to those employees whose duties required them to know the processes.
Other companies conceal the identity of materials by having the supplier deliver them in coded containers. In one case, plastic foam ingredients were delivered in drums of different colors without any other identification of their contents.
D. Document Marking and Control
All documents which contain confidential or proprietary information should be identified and reassessed at regular intervals to see whether the information they contain has ceased to be confidential or has become obsolete. For example, new product designs, which are obvious from the exterior shape of the product, cease to be secret when the product is marketed. However, prior to marketing the design, maintenance of new designs in secrecy may be vital to the company.
All confidential documents should be marked with an appropriate proprietary information notice, such as:
The information disclosed herein is proprietary with XYZ Company and shall not be duplicated, used or disclosed, nor shall the articles or subject matter contained herein be reproduced, without written permission of XYZ Company.
A notice similar to the one above has been used on drawings provided to a vendor. It should be noted that if the evidence establishes that a document was otherwise treated as a confidential document, the failure to apply a proprietary legend will not prevent a court from finding that a document is entitled to protection as a confidential document.
On the other hand, it should also be noted that if your company does establish a policy of stamping confidential documents with a restrictive legend, the failure to follow this policy may be interpreted as a lack of intention to protect a trade secret.
Confidential documents which must be submitted to the government for any reason should be marked to ensure that they are not inadvertently released to others under the Freedom of Information Act. There are specific exemptions under the Act for trade secret information, and the document marking should specifically refer to the exemption. For example: "Subject to exemption (b) (4) of 4 U.S.C. 552".
1. Internal Documents
Confidential documents should never be left in open view or unattended even when they are in use. Any new product designs should be kept in a locked drawer or cabinet, and the design area should be locked at night. Similarly, secret processes and formulas should be kept under lock and key. Courts are impressed by such precautions as a locked box for blueprints and locking the area where the documents are kept at night.
No copies of confidential documents should be made without authorization from an appropriate member of management. All copies should be treated with the same care for confidentiality as the originals. When multiple copies of a confidential document must be distributed, the whereabouts of each numbered copy should be tracked in a log book.
Unwanted documents which contain confidential information should be properly disposed of by incineration and/or shredding. DOCUMENTS CONTAINING CONFIDENTIAL INFORMATION SHOULD NOT BE THROWN IN THE TRASH. Another common investigative technique is rifling through garbage bags.
In each area where confidential documents are located, an individual should have responsibility for marking them properly, keeping them under lock and key, monitoring their removal and return to locked files, not releasing them without authorization, overseeing copies, maintaining the log book of numbered copies of each document, and disposing of them properly. This individual should know to advise the security officer when a departing employee is the possessor of any confidential information, so that the security officer may be certain all such documents are surrendered upon the employee's leaving the company.
The security officer should monitor the practices of each such individual periodically, discussing problems with and reminding him or her of procedures to be followed.
2. Documents to be Released
a. Documents Not Intended to Disclose Secrets
Documents containing technical information prepared for outside release should be screened before release to ensure that they do not disclose trade secrets of the business. These documents include advertisements, sales brochures, hand-outs for trade shows, newspaper press releases, articles to be submitted to technical or trade journals, and training and maintenance manuals intended for unrestricted release to customers.
The company may receive an inquiry for information about a product so that the inquirer may determine whether the product will meet the inquirer's requirements. For example, a customer may want to know whether a trade secret formulation contains a particular ingredient in order to avoid possible adverse reaction with materials to be added by the customer. To accommodate such requests, the business may be able to release censored drawings or descriptions insufficient to reveal any trade secrets involved.
b. Documents Containing Trade Secrets
A system should be established to track and retrieve all confidential documents which have been provided to outsiders for any reason. Even when documents disclosing trade secrets are released to outsiders with the appropriate restrictions, protection may be lost by the failure of the trade secret owner to recover such documents after the purpose for which they were supplied had been accomplished. Therefore, an adequate system to track and retrieve documents is important.
E. Policy Enforcement
A business which institutes policies to protect its trade secrets should be certain that those policies are not too burdensome to follow consistently. Its failure to follow its self-imposed policies can be detrimental to the business if a suit for trade secret misappropriation should arise.
Courts have often held that a business' failure to follow its own trade-secret policies is evidence of a lack of diligence in protecting the information, which can lead to loss of trade secret protection. It is as if the court views the internal policies as standards for conduct in determining whether the business acted reasonably under the circumstances to maintain the information in secrecy.
Therefore, it is important to establish policies which are not overly burdensome so that they can be and are consistently followed. If an item of information "slips through the cracks" and is not treated according to the policy regarding trade secrets, it might not be afforded trade secret status.
For the same reason, if a particular policy becomes too difficult to practice in all cases, then the policy should be formally amended rather than simply ignored. The amendment and the reason therefor should be documented.
IV. Employee Agreements
Even without a written agreement, Florida courts will generally enforce an obligation of confidence binding an employee or ex-employee not to disclose or use the trade secrets of his employer. However, there are several reasons for requiring a new employee whose duties will involve access to trade secrets to sign a written agreement at the time of hiring.
A written agreement may be necessary to enable the ex-employer to obtain relief against a departing employee who was the originator of trade secrets which the employee is taking to his or her new employer, where the ex-employee's duties had not specifically required him to devise new products or techniques. The fact that an employee signed a secrecy agreement puts the employee on notice that trade secrets are involved. Further, an acknowledgment by the employee that the trade secrets are not previously known may go far to undermine any later defense that such subject matter was not secret.
A. Existing Employees
When a non-competition/non-disclosure agreement program is instituted, there is always a question as to whether employees already hired should be requested to sign such an agreement. Long-time employees may take it as a slight to their trustworthiness. Another question is whether the agreement is supported by sufficient consideration to consummate a contract. The prevailing view seems to be that continued employment constitutes sufficient consideration for such agreements.
For these reasons, some employers choose not to request existing employees to sign an agreement, relying instead on the general obligation of trust and confidence binding an employee with respect to the secrets of his employer even in the absence of a written agreement. Other employers take an opposite view, regarding confidentiality as being important enough to risk slighting long-term employees, and relying on the continuance of employment to be sufficient consideration for the confidentiality agreement. When obtaining covenants from existing employees, as a matter of precaution additional consideration could be provided, such as the payment of a sum of money, an increase in salary, or a promotion to a higher position. Depending upon the circumstances of the employment situation, a program could be set up whereby all new employees are required to sign a non-disclosure agreement, and present employees are asked to sign immediately, as well as upon any pay increase or promotion.
B. Provisions Applicable During Employment
Generally, an employee agreement should contain provisions for the following:
This provision requires the employee not to disclose the trade secrets of the employer or use them other than for the employer's benefit. A non-disclosure agreement may contain the following clause:
I agree that I will carefully guard and keep secret all confidential information of [the employer] which I may acquire or originate, and at no time while in the employ of said company or thereafter shall I disclose any such information without first securing the written consent of said company.
2. Duty to Disclose and Assign to Employer
A second necessary provision requires the employee to promptly disclose and assign to the employer any discoveries, improvements or inventions made by the employee during the course of his employment which relate to the business of the employer. Absent such provision, the employee may be considered to have an interest in the subject matter at least equal to that of his employer or, in the alternative, it may be considered that the knowledge is part of the employee's skill and experience, rather than a trade secret of the employer.
Although moonlighting may be quite common and, in general, unobjectionable to the employer, provision should be made to preclude an employee's moonlighting with a company which would compete with the business of the primary employer.
a. Duty not to Organize Competing Company
An employee should be bound not to take steps to organize a competing business prior to leaving the employ of his current employer.
b. Duty not to Solicit Fellow Employees
A further provision may require an employee, during his employment, not to solicit fellow employees to leave the company to undertake competitive employment.
C. Provisions Specifically Applicable After Employment
As an incentive for an employee to comply with the agreement, it might be helpful to include a provision which prohibits the breaching employee from receiving any benefits to which he or she would otherwise be entitled.
1. Non-disclosure and Non-use
A non-disclosure and non-use covenant obligates the employee not to disclose or use the employer's trade secrets after termination of the employment, even when such trade secrets were originated by the former employee.
2. Non-competition/Non-solicitation of Customers
In most states, such an agreement, known as a restrictive covenant not to compete, is enforceable. Florida law prescribes certain circumstances in which such agreements can be enforced:
..one who is employed as an agent, independent contractor, or employee may agree with his employer, to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a reasonably limited time and area, so long as...such employer, continues to carry on a like business therein. Said agreements may, in the discretion of a court of competent jurisdiction, be enforced by injunction. However, the court shall not enter an injunction contrary to the public health, safety, or welfare or in any case where the injunction enforces an unreasonable covenant not to compete or where there is no showing of irreparable injury. However, use of specific trade secrets, customer lists, or direct solicitation of existing customers shall be presumed to be an irreparable injury and may be specifically enjoined. (Emphasis added.)
This version of the statutory provision was enacted in 1990 to place a greater burden on employers to prove irreparable injury should a breach of a noncompetition agreement occur. Certain interests, such as the protection of trade secrets, the use of customer lists, and the direct solicitation of customers, are per se legitimate protectable business interests, the violation of which will be presumed to cause irreparable injury. Should the breach of a noncompetition agreement occur, and it can be proven that one of the enumerated interests was involved, then a court would enjoin the breaching employee. However, if any other interest of the employer is harmed by a breaching employee, it would have to be proven to be a legitimate protectable business interest before an injunction would issue. In an attempt to reduce the employer's burden, the agreement might include the employee's acknowledgment of these legitimate protectable business interests. Though this is not a guarantee that a court would so find, it might help in minimizing the extent of any future litigation.
Florida case law indicates that to a limited degree, extraordinary training and skill development could be considered to be a legitimate protectable business interest. Therefore, if an employer provides extraordinary training to its employees, a recital to this effect could be included in the agreement. In addition, it would be helpful to maintain thorough records regarding the training provided to employees, and to include in each employee review an assessment and recording of the employee's skill level, and if possible to correlate this with training programs.
If, in addition to proving irreparable harm to a legitimate business interest, the agreement is found to be reasonable as to the time and geographic area within which the employee cannot compete, it will be upheld. What is considered reasonable depends on the factual circumstances of each case. In considering the reasonableness of these agreements, factors to consider include the nature of the business, the type of employment and the need to balance the protection of the employer's business against restriction of the employee's use of a skill upon which he or she may depend for a living.
Two years has been held to be a reasonable time in connection with a pest control, spraying and fertilizer business, and for a clothing business. One court held five years to be unreasonable for a lower level salesperson, but stated that such a restriction might be acceptable in the case of a very high-level employee. A radius of seventy-five miles around the city where the employer is located has been held to be reasonable as to area in connection with the business of selling business forms. The Supreme Court of Florida upheld an agreement which prohibited a former employee from competing with his former employer in fifteen Florida counties in which the employee had been managing the employer's exterminating business and servicing its customers. A covenant not to compete anywhere in the nation is not necessarily unreasonable, but the geographic scope must not exceed what is necessary to protect the business and will depend on the particular facts of the case.
While these parameters are generally followed, an agreement which is found to be unfair or oppressive under a particular set of circumstances may be denied enforcement by the courts. If the agreement is found to be unreasonable as to either time or geographic area, the court may "rewrite" and enforce the agreement in what it determines to be reasonable terms.
D. Creating Climate of Confidentiality
It is important for the business to create a climate of awareness among its employees that they have an obligation to preserve its trade secrets.
New employees should have this explained to them at the time of hiring. Posters can be displayed in appropriate areas of the plant, warning employees of their obligation of secrecy. If there is a house journal, periodic reminders should be published in it. Managers should be instructed to periodically remind employees working under their supervision of their confidentiality obligations.
E. Exit Procedures
The single most important step in protecting company secrets against a departing employee may be an effective exit interview. The interviewer should do the following: (i) recover from the employee any materials containing company secrets before he departs; (ii) retrieve and file the employee's photo I.D., and any other identifying materials which indicate that the employee is authorized to have access to the premises or to represent the company; and (iii) remind the employee of his continuing obligation not to disclose the trade secrets or use them in his new employment. Further, the interviewer has an opportunity to learn in what new employment the employee will be engaged.
Departing employees should be requested to sign a statement that they have returned all confidential materials and that they acknowledge their continuing confidentiality obligations. If it appears that the employee's new employment is with a competitor in a position likely to involve use of the trade secrets of the former employer, the competitor can be advised of the confidentiality provisions of the employment agreement binding the former employee.
A departure interview form should be the final entry in each employee's personnel file, a sample of which is attached as Appendix "B" to this memorandum.
V. Outside Disclosures
A. Vendors/Outside Contractors
Any business which hires vendors to work to specification on parts or formulations that incorporate trade secrets, or which utilizes an outside contractor to build machinery, components, etc., or which engages outside consultants to provide services involving sensitive information, should obtain advance commitment of the vendor, contractor or consultant to hold in confidence any trade secret information supplied by the business to enable the vendor's performance.
An oral commitment of the vendor may be enforceable, or such an obligation may be imposed on the basis of the relationship between the parties. However, it is far safer to rely on neither and to set out the commitment in writing. It may be included as a clause in the standard terms and conditions or your company's Purchase Orders or Requests for Quotations. For example, the clause could read:
VENDOR agrees to keep confidential all proprietary information provided by XYZ CORP. and not to use, reproduce, distribute or disclose this information without the prior written consent of XYZ CORP. Upon demand by XYZ CORP., VENDOR agrees to destroy or return all items containing proprietary information and copies thereof.
In order to best protect trade secrets, the vendor's commitment should be set forth in a separate secrecy agreement.
Any such agreement should obligate the recipient of any documents containing the trade secrets to return them promptly to the discloser, together with any copies which have been made, after the purpose for which they have been furnished has been accomplished.
One area which is generally not subject to protection is the so-called "reverse engineering" process which may occur upon sale of a design or product to the public. In general, unless protected by patent or copyright, or by a specific contractual agreement such as those discussed herein, anyone is free to copy a design or product which is in the public domain.
One limitation occurs when a specific design is widely known as emanating from a specific source such that the design may be said to have acquired "secondary meaning". That is, members of the public are so familiar with the design that they assume the "copy" is the product of the original designer. Under such circumstances, the design may be subject to the principles of consumer protection law.
VI. Secrecy in Litigation
Generally, litigation requires that proceedings be a matter of public record and may involve the very trade secret itself. This poses special problems of secrecy which are best resolved on a case by case basis, with specific regard to the facts, issues and posture of the client in the case itself.
A detailed discussion of this topic is outside the scope of this memorandum. However, precautions should generally include an early agreement upon an appropriate protective order, filing evidence and certain testimony under seal, blacking out sensitive material which is not relevant to the proceedings, restricting access to copies of documents and possibly excluding individuals from the presence of depositions or testimony.
Once trade secrets have been identified and an overall trade secret protection program established, it is vital to maintain the program in an appropriate manner. Physical measures, surveillance, limiting access and view, employee participation, maintaining a visitors log book, and appropriate written agreements with employees and outsiders all constitute essential elements in the overall program. Implementing and maintaining such a program is well worth the effort. If a breach of security occurs and trade secrets are misappropriated by a competitor, it is vital to be able to substantiate having taken the appropriate precautions to safeguard the company's confidential information.