copyrightsymbol_4713d956160a9Keep Your Secret Sauce Safe

By Don Lipper & Elizabeth Sagehorn - Technology Writers

Many years ago, before he'd had a chance to file a patent application, one of the authors' grandfathers introduced his revolutionary invention at a local trade show. He proudly (and naively) allowed people to take photos and make sketches and notes. Several months later, a competitor introduced a very similar model that they sold cheaply and used to corner the market.


On the other hand, another grandfather trademarked the phrase "man made fiber" and launched an industry.


Guess who died with the most toys?


Nothing is more important to the success of your small business than preserving your intellectual property. Whether it is your award-winning cookie recipe, your groundbreaking method of distribution or your top secret training manual, you have the right and the responsibility to protect your trade secrets.


Not sure what a trade secret is, or whether you have one? According to Thomas Morton of Pillsbury Winthrop Shaw Pittman LLP in Sacramento, "a trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business and which gives that business an opportunity to obtain an advantage over competitors who do not know or use it. The three key elements to a trade secret are: the information is not generally known or reasonably ascertainable, the information derives value from the fact that it is not known and the information is the subject of reasonable efforts to maintain its secrecy."


Trade secrets can be protected by several legal means:

  • A copyright protects artistic works like books and music from unauthorized reproduction for one or more decades, and costs $45.
  • A patent protects a new or radically improved invention from unauthorized use for 20 years. Because of its complexity, costs can sometimes soar to several thousand dollars.
  • A trademark protects a distinctive name or logo like the green and white Starbuck's sign or the swirly "D" in Disney. It costs less than $400.
  • An industrial design right protects the look of something like furniture or tile.


The first step to protecting yourself is prevention. "A business cannot expect to protect its trade secrets unless it treats them as trade secrets," observes Stephen L. Davis of Davis & Leonard LLP in Sacramento. If a disgruntled former employee publishes your cookie recipe on the Internet, you may have no legal recourse if you can't prove that you made an attempt to keep that information confidential in the first place.


Small businesses must make efforts that are "reasonable under the circumstances" to protect them, notes Davis. These include:

  • Only allowing outsiders to see trade secrets on a need-to-know basis.
  • Having all persons who view trade secret information sign nondisclosure agreements.
  • Stamping documents that contain valuable information as "confidential".
  • Keeping the information in a safe, secure place, such as a locked filing cabinet, safe or a password-protected computer system.
  • Shred all outdated confidential materials.
  • Restrict the use of portable data devices like iPods and flash-based USB drives around your electronics.


What is "reasonable under the circumstances" will depend upon the nature of the business and the nature of the trade secret.


None of this has to cost you a fortune. Boilerplate NDAs can be found online for little or no cost. A pre-inked "confidential" stamp is $8 at your local office supply store. And you probably already have a locked filing cabinet and computer. If it's a plutonium-grade secret, invest in a locked safety deposit box at your local bank and ritually sacrifice anyone who has access to it.


Now that you have your secret, you need to decide how best to protect it. If it is something like the recipe for Coca-Cola, keep it under wraps. If it's something that by its very nature will be made available to the public, i.e. the people who buy it, then invest in a patent.


Take the time to do an inventory of your small business and decide which elements you want to take the time and money to protect. Start with the company name. If you're establishing a cookie company, you can't trademark the word "cookie", it's too general. You probably would also run afoul of the law if you tried to call it Mrs. Feeld's Cookies, as that might be construed as highjacking the lawful name of the much bigger company run by Mrs. Fields. You could however make a case for calling it Mrs. Pasture's Cookies. Not a very appetizing name, but we're not here to help you with your marketing efforts.


Once you've made a list of the properties that you want to protect, it's time to hire an intellectual property attorney. This is something that you can't afford to wing. It needn't cost you a fortune. Some attorneys charge by the project, some by the hour, so bear that in mind when you're sussing out your candidates.


The attorney will file the appropriate paperwork. The first step will be a search of the federal registry and make sure that no other company has already laid claim to the name "Mrs. Pasture's Cookies" (a safe bet). Once the way is clear, your attorney will file the application. The process usually takes six to nine months, but the legal protection will be retroactively enforceable to the date of the application. In the (highly unlikely) event that someone else tries to do business under the name of Mrs. Pasture's Cookies, you'll be able to prove that you laid claim to the name way back when.


Once the trademarks/copyrights/patents have been issued, it is your responsibility to ensure that no one else misappropriates them. If Debbi Fields takes an unexplainable liking to your company name and puts it on her stationary, you must defend your trademark or risk losing it. Do a periodic Internet search to make sure that the only uses of your name, logo, etc. are those that are authorized by you.


In the even that your trademark, et al are not issued, you can, and should, still treat your trade secrets as such. Make sure your NDAs don't have a short expiration date. Keep things locked up. The formula for making Coca-Cola is only known to two people at a time and they're not allowed to fly on the same plane together. You don't have to go to these lengths, but it does pay to use discretion.


After all, don't your grandchildren deserve to eat bon-bons in the lap of luxury?


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