Business Monday

Protect your trade secrets, ideas from misappropriation

FELDMAN
FELDMAN

Trade secrets and ideas, because they’re intangible, are particularly prone to misappropriation. Businesses and entrepreneurs must go on the offensive to protect these valuable assets.

A trade secret is information that derives independent economic value from not being generally known or readily ascertainable by others and that is subject to reasonable efforts, under the circumstances, to maintain secrecy. So, what reasonable measures can a company take to maintain the trade secret status of its information? By using the language “under the circumstances,” the Uniform Trade Secrets Act indicates that what is considered “reasonable” is determined on a case by case basis. However, all businesses should adopt basic policies to protect trade secrets.

First, confidential information should be limited to only employees, or others, who need to know, and steps should be taken to restrict access. As most information is stored on computers, restricting access means implementing an effective password protection plan, which may include regularly updating passwords and ensuring that an employee who has left the company is immediately locked out of the system. Nondisclosure agreements should also be liberally used with vendors, customers and other third parties with whom trade secrets are shared. A business also needs to take control of sensitive information that must be accessed remotely via home-based computers and laptops, smartphones and electronic tablets. One such policy: allowing access only on work-issued devices so that the company retains a record of who is viewing the information and when.

In addition to protecting its own secrets, a company should also be vigilant to avoid unintentionally acquiring the trade secrets of others. To avoid exposure to an IP dispute, an employer should mandate that a new hire sign an agreement that she or he will not bring or use trade secrets of others for the benefit of the company.

Like misappropriated trade secrets, misappropriated ideas are also actionable provided their use and dissemination were appropriately restricted. The Walt Disney Company learned this the hard way. All Pro Sports Camp Inc. confidentially proposed a sports complex at Walt Disney World, which Disney went on to develop alone. A lengthy legal battle ensued over Disney’s use of All Pro Sports’ idea. The case settled after a jury awarded All Pro Sports $240 million dollars.

In response to the case, All Pro Sports Camp v. Walt Disney Company, the Florida Legislature passed Florida Statute 501.972, which precludes any action for the misappropriation of an idea “unless the parties to the claim or cause of action have executed a writing sufficient to indicate that a contract has been made between them governing such use.” In other words, in Florida, there are no implied duties to maintain the confidentiality of a disclosed idea or to forbear from its subsequent use. Florida law requires that for these obligations to exist, they must be in a writing acknowledged by both the disclosing and receiving parties.

Similarly, parties receiving ideas from others would be wise to use idea submission agreements. An idea submission agreement provides the terms under which a receiving party agrees to accept a third party’s ideas and ordinarily allows the receiving party to make free and unrestricted use of a submitted idea. The agreement therefore protects the receiving party from any subsequent claim for idea misappropriation.

In relation to both ideas and trade secrets, Florida companies must exercise care in both disclosing and receiving information. Disclosers must take reasonable means to protect the confidentiality of what they are disclosing. And receivers must take reasonable measures to be certain that what they are receiving is not cloaked with confidentiality or other restrictions on use or disclosure. The failure to clarify in writing what is expected from either a disclosing or receiving party could easily materialize into a costly and nasty legal dispute. The wise move therefore is to never disclose or receive sensitive business information without a written understanding governing the disclosure and use of the same.

Jeffrey D. Feldman is a founding member of the intellectual property law firm Feldman Gale. He can be reached at JFeldman@FeldmanGale.com

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