By: Jeana L. Goosmann, CEO & Managing Partner
Examples of Trade Secrets in Everyday Businesses
Many CEOs and business owners overlook the fact that their company likely possesses trade secrets. Trade secrets aren’t limited to groundbreaking inventions or proprietary formulas — they often exist in the day-to-day operations and strategies that make a business unique and competitive. Here are two common scenarios:
Scenario 1: A Manufacturing Business
Trade Secrets:
- Production Processes: A company uses a proprietary method to produce its goods faster and at a lower cost than competitors. For example, a furniture manufacturer may have developed a unique assembly technique or workflow that minimizes waste and increases efficiency.
- Supplier Lists: The manufacturer has cultivated relationships with niche suppliers who provide high-quality materials at discounted rates. These relationships, built over years, are not publicly known and give the business a competitive pricing advantage.
Why It Matters:
If a former employee discloses these processes or supplier relationships to a competitor, it could erode the company’s market advantage. These are trade secrets, as they derive value from being kept confidential and are critical to the company’s profitability.
Scenario 2: A Service-Based Business
Trade Secrets:
- Customer Data and Preferences: A marketing agency maintains a detailed database of client preferences, marketing strategies and campaign performance data. This information allows them to deliver highly personalized services that competitors can’t match.
- Proprietary Tools: The agency has developed an internal algorithm to optimize ad placements, resulting in higher returns on investment for their clients.
Why It Matters:
If an employee downloads the customer database or internal algorithm before leaving to start their own agency or work for a competitor, they are misappropriating trade secrets. This information was developed at great expense and is not publicly accessible, making it a valuable trade secret.
Helping CEOs Recognize Their Trade Secrets
Here are some examples of trade secrets many CEOs don’t realize they have:
- Pricing Strategies: Your method for setting competitive pricing balances profit margins and market demand.
- Business Strategies: Expansion plans, marketing approaches or sales tactics unique to your company.
- Vendor and Partner Relationships: Specialized relationships or arrangements that aren’t publicly disclosed.
- Training Materials and Manuals: Internal guides or processes for training employees that streamline operations or create consistency in service.
By understanding and identifying these assets as trade secrets, businesses can take steps to protect them under the Defend Trade Secrets Act (DTSA) and state laws. At Goosmann Law Firm, we help audit operations uncover and safeguard trade secrets.
As business leaders, you understand the value of innovation and proprietary information in maintaining a competitive edge. However, with increasing mobility in the workforce and technological advancements, the risk of trade secret misappropriation has never been higher. We regularly handle these cases and claims. The federal Defend Trade Secrets Act (DTSA) provides critical tools and protections for your business’s most valuable assets — but are you taking full advantage of them?
At Goosmann Law Firm, we’ve seen how businesses can suffer when trade secrets are compromised. Here are the key steps and strategies to protect your business and respond effectively to potential misappropriation:
1. Identify and Protect Your Trade Secrets
Not all confidential information qualifies as a trade secret under DTSA. To be protected:
- The information must have independent economic value from not being publicly known.
- You must take reasonable measures to keep it secret.
Start by auditing your policies and processes to ensure proper safeguards are in place, including secure storage, confidentiality agreements and employee training.
2. Understand the Risks of Misappropriation
Misappropriation under DTSA can occur through:
- Theft, bribery or deception.
- Disclosure or use of a trade secret without permission.
Ensure your business has protocols to monitor, investigate and respond to suspected misappropriation, especially during employee departures or when collaborating with third parties.
3. Use DTSA’s Powerful Remedies
If misappropriation occurs, DTSA offers remedies that can give your business the upper hand, including:
- Injunctive relief to prevent further use or disclosure of trade secrets.
- Monetary damages for actual losses and unjust enrichment.
- Exemplary damages and attorney fees for willful and malicious conduct.
These remedies can be critical in stopping damage and recouping losses, but they require careful navigation of DTSA’s provisions.
4. Stay Compliant with DTSA Requirements
Employers must comply with DTSA notice provisions to fully leverage its protections. This includes including immunity notices in employee and contractor agreements. Without this step, you may forfeit certain remedies like attorney fees or exemplary damages.
Our team can help review and update agreements to ensure compliance.
5. Be Prepared for Litigation
Trade secret litigation is complex and requires experienced counsel to protect your interests. Whether it’s pursuing claims in federal court under DTSA or leveraging state law remedies, choosing the right legal strategy is crucial.
The Bottom Line: Don’t Leave Your Trade Secrets Exposed
Trade secrets are often the lifeblood of a business, and their protection requires proactive measures. At Goosmann Law Firm, we help businesses like yours safeguard their competitive edge and respond swiftly when threats arise.
If you have questions about protecting your trade secrets or suspect misappropriation, contact us today. We’re here to help you stay ahead of the curve and protect what you’ve worked so hard to build — call to schedule a consultation.