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Trade Secrets: A Valuable and Often Overlooked Asset

Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog
Zies, Widerman & Malek
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Trade secrets are a very important part of any intellectual property portfolio. It is not much of an overstatement to say that virtually every business has trade secrets worth protection, regardless of whether the business is run as a sole proprietorship, a small business or Fortune 500 company. Perhaps it is better to say that every business has assets that could and should be protected as trade secrets, but the truth is that many companies, even large companies, fail to do so properly.

The reason that it can be said that trade secret protection can be obtained by any business is for two reasons. First, trade secret protection can exist for virtually any business information. Second, trade secret protection is extremely easy to obtain.

Let’s explore the first point in more detail. By definition, a trade secret relates to any business information that is valuable because it is a secret. While most consider trade secrets to be synonymous with invention, that is an oversimplification. It is, of course, true that trade secrets exist for most if not all inventions, but trade secret protection can be had for such things as a customer lists and supplier or vendor lists. This is true because your customer lists and supplier lists are something that you benefit from keeping away from potential competitors. For example, consider that you are operating a Home Cleaning Business. As a good friend of mine, Llew Gibbons who teaches intellectual property law at the University of Toledo College of Law, tells his students: “There are a finite number of people who are willing to pay other people to clean their homes.” The point is that with this business, or any business, one of the hardest things to develop are customers who are interested in your product or service. That is why you advertise – to attract customers. If a competitor could obtain your customer list and just solicit them the competitor would have lessened or eliminated the need for advertising expenses because they are starting with a targeted list of people who are already predisposed to being interested.

With respect to the second point, trade secrets are easy to protect because all the law requires is that you take reasonable precautions to keep the information a secret. What is reasonable will vary depending on the value of the business information, but keeping things such as customer lists in a filing cabinent in a locked office and stamping the file “Confidential” are relatively low cost efforts and should be employed. Any other efforts you take are certainly helpful, but you must do something.

So what is the down side of trade secret protection? As with many things that are easy to acquire, they are easy to lose. As soon as the trade secret is no longer a secret you have lost all protection! Trade secrets are indeed fragile. So this means that while you can and should keep trade secrets, and you should take reasonable efforts to keep the information protected, if other forms of intellectual property are available you should at least consider them. The other form of intellectual property that you should consider, if available given the subject matter of the trade secret, is patent protection. Patents can be expensive though, so running to file a patent application may not make the best sense unless the business information is particularly valuable.

For more information about trade secrets see:

Confidentiality Agreements

Trade Secret Basics

Trade Secrets – The Secrecy Requirement

Uniform Trade Secret Act

About the Author

Eugene R. Quinn, Jr.
President & Founder of IPWatchdog, Inc.
US Patent Attorney (Reg. No. 44,294)
Zies, Widerman & Malek

B.S. in Electrical Engineering, Rutgers University
J.D., Franklin Pierce Law Center
L.L.M. in Intellectual Property, Franklin Pierce Law Center

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Gene is a US Patent Attorney and the founder of IPWatchdog.com. Known by many as “The IPWatchdog.” Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had millions of unique visitors.Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, CNN Money and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.