Nov 20, 2012
The American people, we are told, want their government to be more transparent. Whether or not that’s actually true, one thing is for sure: when the subject is business, rather than government, we strongly prefer old-fashioned secrecy. Customer lists, patents, processes, tools, pricing, marketing strategies, product formulas, prospects, you name it. We, as business owners and managers, want the outside world kept in the dark.
As counsel, I tend to come in when this desire for secrecy has already been frustrated — when the proverbial cat has been let out of the bag; that’s when business owners look for the responsible parties and a way to lay blame and collect damages.
Maryland, like most states and the federal government, affords companies protection against the misappropriation of trade secrets. In addition to remedies which may arise out of contractual relationships, the Maryland Uniform Trade Secrets Act provides a strong remedy for misappropriation of a trade secret. MUTSA defines a trade secret as:
Information, including a formula, pattern, compilation, program, device, method, technique or process that:
a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
b) Is the subject of efforts that are reasonable under the circumstances to maintain secrecy.
It is this final section that insurmountable hurdle for many companies looking to go to war over what they see as the wrongful taking of their trade secrets. Imagine a judge looking down at you from the bench and asking two related questions – one rhetorical, one not:
1. What steps did you take to safeguard what you now claim to be trade secrets?
2. If you didn’t treat this information like a secret, why should I?
Full disclosure: I am one of those small business owners who drive IT people nuts. I hate changing passwords, I fight the inconvenience that comes along with IT security and I bristle every time NetGear blocks my access to my fantasy football site of choice as “inappropriate or tasteless.” (I’m guessing because of the “fantasy” tag.)
The lawyer in me recognizes, however, that, even from a legal perspective, our IT guy has a point. If I don’t take even the most minimal safety precautions by restricting access to what I deem to be sensitive material, what right do I have to ask the court to rectify my error after the horse and the barn have separated?
Stop for a minute and think about the information your company holds dear. That information may already be the subject of confidentiality agreements or other restrictive covenants. The sensitivity of that information may be emphasized in company memos and personnel manuals. But regardless of what it is – customer lists, pricing structure, marketing strategy or anything in between, honestly answer my hypothetical judge’s questions.
Your challenge, of course, comes after you self-grade your two-question test. If you fail, what are you going to do about it?