USING NDAS as part of a trade secret program

Using nondisclosure agreements consistently is the single most important element of any trade secret protection program. But it’s not the only element. NDAs should always be used in conjunction with other commonsense measures to ensure that your confidential information stays confidential.

Can You Keep a Secret?

Trade secret protection is based on the simple notion that keeping information close to the chest can provide a competitive advantage in the marketplace. But simply saying that information or know-how is a trade secret will not make it so. You must affirmatively behave in a way that manifests your desire to keep the information secret.

Some companies go to extreme lengths to keep their trade secrets secret. For example, the formula for Coca-Cola (perhaps the world’s most famous trade secret) is kept locked in an Atlanta bank vault that can be opened only by a resolution of the Coca-Cola Company’s board of directors. Only two Coca-Cola employees ever know the formula at the same time. Their identities are never disclosed to the public, and they are not allowed to fly on the same airplane.

Fortunately, such extraordinary secrecy measures are seldom necessary. You don’t have to turn your office into an armed camp to protect your trade secrets, but you must take reasonable precautions to prevent people who are not subject to confidentiality restrictions from learning them.

How much secrecy is “reasonable”? This depends largely on two factors:

• The physical and financial size of your company. A small start-up company need not implement the same type of trade secrecy program as a Microsoft or IBM.

• The value of your trade secrets. More care should be taken to protect extremely valuable software code or marketing plans than relatively unimportant personnel information.

Someone needs to be in charge of a company’s secrecy program. You can designate someone to serve as the company’s security officer, or have the employees involved with each new project devise and enforce their own security plan. Either approach can work. The keys to any trade secret protection program are to devise a secrecy plan you and your employees can live with—and then stick to it.

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