cbareport_Oct12 - page 8

8
l
October 2012 CBA REPORT
feature article
A
A
s business entities grow, they
often generate scientific or
technical information either
actively through strategized growth, i.e.
research and development, or passively
and incidentally, for example through
the gradual and natural accumulation of
customer lists and/or data, design, and
processes unknown to their competitors.
1
The Ohio Uniform Trade Secrets
Act (“OUTSA”) prohibits the misap-
propriation (acquisition, disclosure, or
use) of a “trade secret” through improper
means.
2
Of course, OUTSA defines
the terms “misappropriation,” “trade
secret,” and “improper means” and the
application of those definitions to the
facts is instrumental to a proper analy-
sis of the strengths and weaknesses of a
trade-secret misappropriation claim. If a
“person”
3
is found to have misappropri-
ated a trade secret, the Court may award
injunctive relief, damages, and attorneys’
fees.
Business entities that invest heavily
in research and development generally
safeguard the fruits of their labor by
implementing standard operating pro-
cedures (“SOPs”) designed to safeguard
their secrets. For example, a business
may (1) keep proprietary formulas,
mixes, and processes, in a locked office
protected by a security alarm; (2) require
outside advisors, who have access to the
proprietary information, to sign a con-
fidentiality agreement, or in the case of
current employees a noncompete agree-
ment; (3) at the exit interview, require
former employees to return proprietary
information to the employer; (4) re-
quire potential or existing customers to
execute nondisclosure or confidentiality
agreements; (5) require the receptionist
to screen visitors; (6) use a buzzer lock
system for admittance; (7) quarantine
the general public or competitors from
the plant; and (8) mark all drawings sup-
plied to outsiders for business purposes
as “CONFIDENTIAL” or “PROPRI-
ETARY” and restrict the further use and
disclosure thereof. The list of security
measures that can be taken is nearly
infinite.
A stumbling block for many small
businesses occurs when they neglect
to implement or follow SOPs designed
to protect important information. If a
Court deems that a business has failed
to make “reasonable efforts” to maintain
its secrets then it will be determined that
no trade secret exists and therefore no
protection is warranted under OUTSA.
Businesses should proactively guard
and maintain those secrets that give it
a competitive advantage at the earli-
est stage, whether that information is
actively created or passively generated.
Unfortunately, business entities that
passively or incidentally accumulate
information, whether it is customer lists,
contacts, processes or otherwise, often
do not treat such information as confi-
dential until it is too late and a former
employee or competitor has poached
the information with the intent to use
it against the originating entity in the
market. In determining what steps are
necessary for a company to safeguard
its trade secrets, the value of the secret
should be weighed against the proposed
security measures to be taken. Because
trade secrets can be a rather amorphous
concept, I advise clients to identify the
specific trade secret, identify the compet-
itive advantage gained, and identify the
measures taken to maintain confidenti-
ality. If a business cannot afford to lose
its trade secret(s) then it cannot afford
not to create and implement SOPs, i.e.
take active measures to ensure that the
information is protected under OUTSA
so that it can seek judicial enforcement/
remedies if such information is misap-
propriated. The statute of limitations for
the misappropriation of a trade secret is
four years.
4
One additional consideration for enti-
ties that contract with governments and
municipalities is whether confidential
By Joel M. Frederic
Preserving Trade Secrets
for Ohio Business Entities
Unfortunately, those business entities
that passively or incidentally accumulate
information, whether it is customer lists,
contacts, processes or otherwise, often do not
treat such information as secretive.
1,2,3,4,5,6,7 9,10,11,12,13,14,15,16,17,18,...40
Powered by FlippingBook