Small Business Trade
Secrets
Every business, whether large or small,
has a secret considered vital to success. It could be a family
recipe for a meat dish that has a special spice or a new way to
create a rubber product cheaper but yet it lasts just as long.
Whatever it is, it is of value to the business and is often
considered to be one of the most important assets when the business
is up for sale.
Unfortunately, trade secrets cannot be
easily and universally defined. The real definition comes from the
fact the following three tests on the idea: is kept secret, is
considered important and necessary for the business’s success and
has a value to it. Those three tests must be met for a court to
protect the trade secret in a legal issue.
A trade secret can be almost anything
used in the business or created by the business as long as it is not
generally known in the industry. For example, if a business owner
creates a new recipe using pinto beans for a homemade chili, it will
not probably be considered a trade secret because 1) chili is common,
2) pinto beans are common, and 3) most importantly, it is common
knowledge you can use pinto beans in chili. What a trade secret does
is provide the business owner with a competitive advantage and allows
it operate a higher profit margin usually.
Trade secrets are treated differently
than copyright or patents. As long as they are kept secret they
remain valuable to the business. But that value can diminish when a
competitor has figured out how to duplicate the process. Once
discovered independently, the once trade secret can be used without
any legal action being able to be taken unlike the copyright or
patent. If obtained illegally, then the owner has the right to take
legal action and claim damages.
How can a business protect its secrets?
The first step is to determine what in your processes create a trade
secret. Unfortunately, the information gathered in creating a product
cannot be labeled as one as it usually represents skill or industry
practices. Courts also protect an employee’s rights to carry with
him his experience from one employer to another or her own business.
The second step is to write them down
in a log and indicate who knows the secret. The business owner needs
to make sure all the people on the log understand the importance of
the secret to the business and they are not to disclose the
information.
While no protection plan is entirely
safe, the starting of one should indicate to the staff the owners are
serious about protecting the secret and its importance to the
business.
Your local University of Missouri
Extension Small Business Technology Development Center can assist you
in identifying and classifying trade secrets through its programs.
For such assistance, please call 573-243-3581 and ask for Richard
Proffer.
