Now that you realize that your business may have trade secrets which you wish to protect, what is you next step?
The next thing you need to do is “sit right down and write yourself a letter” and make a list of everything your company has that may be a trade secret. To do that, you need to know what constitutes a trade secret, which is the subject of this post.
As I wrote in my previous post, a trade secret is any formula, pattern, device, or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it. But frankly, that definition is much too broad and “lawyer speak” to be of much use to the average businessman, so let’s discuss some common things that may be a trade secret in a small to medium-sized business.
Customer Lists: Do you have a list of customers that you (or you employees) have created over the years? Was that list created by you burning shoe leather and getting a cauliflower ear from cold calling on the telephone? Does it contain information about each client that you have come to know from dealing with them? Their preferences and price sensitivity? Their interests? The names and birthdays of the wife and kids of the “go to guy” who makes purchasing decisions for your client. That list is probably going to be considered a trade secret under the law, if you take steps to protect its confidentiality.
Vendor Lists: Do you have a list of preferred vendors that you compiled by trial and error over the years? Not all vendors are created equal, after all. Some might offer you a better price, better service, or a better product. The important thing is that this list of “proven” vendors gives you a competitive advantage over your competition. If Spacely Sprockets gives you a 5 percent price break on sprockets because you buy all your sprockets from Spacely, you don’t want your competition to know it so they can negotiate the same deal, undercutting your pricing advantage! These vendor lists and information could be, and probably are, a trade secret of your company.
Business/Manufacturing Processes: Have you developed processes or procedures over the years that give your company an edge? It doesn’t have to be something that is patentable; just something that you have developed by your own hard work which gives your company a competitive edge. And what about the expensive “efficiency survey” you had the ”experts” from that out-of-town consultant firm conduct? What about the internal forms you have created over the years that allow your company to be more competitive? These things, among others, could be your company’s trade secrets, if you protect them.
The basic theory behind protecting trade secrets is that a dishonest competitor or employee should not profit from the hard work of the person or entity that developed the trade secret. But as in many things, “the law rewards the diligent and not those who sleep on their rights.” White, Ward & Erwin v. Hager, 112 Tex. 516, 527 (Tex. 1923).**
Know your rights regarding your company’s trade secrets, and what those trade secrets are, and you are well on your way to protecting them from your competition.
In a future post, I will discuss how to protect those trade secrets. Until then, if you feel you need legal advice or representation regarding the issues discussed in this blog, or otherwise, please feel free to contact our firm and set up a consultation.
Lee Keller King
The Vethan Law Firm
Follow me on Twitter: @bizlawyertexas
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** As this is a Blawg (or legal blog), I feel obligated to throw in at least one legal case cite per entry. Please feel under no obligation to read the case.
LKK