Trade Secrets: The “Dark Side” of Intellectual Property

By: Emily Morris Posted in Uncategorized

Trade secrets are just that….secret. They help you do business by giving

Image via Alexey Kljatove at flickr.com

Image via Alexey Kljatove at flickr.com

your products or services an edge over the competition’s. I call them the “dark side” of intellectual property because the term applies to information kept in the dark to outsiders. And it sounds cool.

Here is a brief explanation of trade secret basics and how they can apply to your work as a freelancer:

1.    Do I even have a trade secret?

Maybe. It depends on your line of work.

To qualify as a trade secret, the information at hand must derive independent economic value and not be generally known or discoverable by competitors.[1] In other words, it needs to be information that you use in your business that provides a competitive edge, and that you also keep confidential.

For example, a local pit master may consider his brisket recipe a trade secret. It brings in the lunch crew every day and his competition just can’t figure out the magic ingredient!

Does your freelance work have confidential know-how that gives you an edge?

2.    How will identifying trade secrets help my freelance business?

Labeling the competitive information within your freelance business as a trade secret can be much easier and more affordable than attempting to qualify under its tedious and highly expensive older brother – the patent. Patents can require years and many thousands of dollars in attorney fees to complete the process.

Additionally, trade secrets have a lower qualifying threshold than patents. Patents must be considered new, useful, and non-obvious to other inventors.[2] So long as the information that you want to protect is not generally known or discoverable by competitors, it should meet the easier standard for protection as a trade secret.

3.    I think I have a trade secret. How do I register it?

You don’t! Trade secrets are different from other types of intellectual property in that they don’t require registration with a government entity or database. Because they are confidential, trade secrets should be identified internally within the business and kept…secret. Be sure to implement internal procedures that keep the information private and hold any individuals who access it accountable.

4.         How are they enforced?

Trade secrets are a bit different from other forms of intellectual property (trademarks, copyrights, patents) in that they are protected by state law instead of federal law, and they are not registered in a comprehensive database. The most proactive way to protect a trade secret is through contracts in the form of confidentiality clauses and non-disclosure agreements.

If you find yourself in the midst of a trade secret dispute, it will likely be heard in a Texas state court and determined subject to interpretation of the Texas Uniform Trade Secrets Act and applicable contract law.

If you do work as an independent contractor, then you may be exposed to trade secrets of the person who hired you for the job. Be careful to study any independent contractor agreements that you sign for clauses that pertain to the principal’s private information and then abide by the agreement.

Conversely, if you are the person doing the hiring, you’ll want to make sure the hired hands sign agreements to protect your secrets’ confidentiality. This counts for both project-based independent contractors and part-time or full-time employees. The agreements should also include legal remedies for any breach thereof, stating how your rights can be enforced when the information is leaked.

 

So, my fellow freelancers, you must know what your business secrets are, and then keep them secret. And if you are exposed to someone else’s secrets, check the relevant contract provisions and be sure that you are in compliance with them.

For additional questions on this topic or other small business issues, please contact Emily Morris, JD.

* This is the third of several installments related to intellectual property laws for freelance workers. You can find the entries on trademarks here and copyrights here.

 

[1] 6 Tex. Civ. Prac. & Rem. § 134A.002(6).

[2] 35 U.S.C. § 101 (2015).

Emily Morris

Emily Morris

Emily Morris is a transactional attorney who loves working with small businesses in their everyday needs. Outside of work, she enjoys singing, traveling, and two- stepping with her husband Andy.
Emily Morris

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