There is another important type of intellectual property: trade secrets. Unlike patents, copyrights and trademarks, trade secrets are not protected by government filings, but by maintaining secrecy.
A trade secret can be almost anything that a company uses to obtain a competitive advantage that has value from staying confidential. Secret formulas, manufacturing processes, customer lists, supplier lists, business plans and financial information may, depending upon the circumstances, qualify as trade secrets. This list, however, is hardly exhaustive.
In order to qualify for legal protection as a trade secret, information generally has to have actual or potential economic value and has to be confidential. In addition, it has to be subject to reasonable efforts to maintain confidentiality.
Trade secret protection is an attractive for a number of reasons, including that it does not involve governmental filings, which can be expensive. In addition, trade secret status can be maintained for a long period of time (essentially, as long as confidentiality is maintained).
If information qualifies for trade secret protection, most states have statutes that provide broad remedies against misappropriation or misuse of trade secrets, including injunctions (which might include orders prohibiting use of the information or requiring the information to be returned), monetary damages, and sometimes punitive damages and attorney's fee awards.
Trade secret cases often involve very large stakes. Multi-million dollar verdicts are not uncommon.
Trade secret cases frequently involve former employees who had access to the information. Because most information is electronically stored, information may be misappropriated using portable hard drives (which hold huge amounts of information) or thumb drives. With these devices, it is often possible for a former employee to walk out the door with all of the company's information in a pocket or purse. Other trade secret cases may involve suppliers or business partners who had access to the information for a particular project.
Many trade secret cases boil down to the issue of whether the plaintiff (the trade secret owner) used reasonable efforts to keep the information secret. This inquiry will often involve issues such as whether access to the information was restricted and whether those having access have signed non-disclosure or confidentiality agreements (often called "NDAs"). This issue, however, will depend on the particular facts of the case.
Machinery and equipment suppliers relying on trade secret protection should make sure they have a well-developed plan in place to protect the information, which should include the use of appropriately drafted NDAs. It is also a good idea to consult with counsel about other steps that might be taken to protect the information.
It is also important to have procedures in place to make sure that new employees do not bring trade secrets from their former employer with them. This can be accomplished by appropriate hiring procedures and employment agreements. Employment issues vary from state to state, so it is important to consult with an attorney in your jurisdiction.