The “Free” IP – Best Practices for Protecting Your Trade Secrets
By Kevin Burns, Associate, Fisher & Phillips LLP
As the United States has shifted to an information and technology-based economy, it has become increasingly important to protect intellectual property. Indeed, for many companies, intellectual property is their most important asset. The protections available for intellectual property range and generally fall into four categories: (1) patents, (2) trademarks, (3) copyrights, and (4) trade secrets. While the first three forms of protection all come with upfront costs, such as filing fees and attorneys’ fees, trade secret protection does not and simply requires companies to follow best practices. It’s the “free” IP.
Brief Overview of Intellectual Property Protection and Cost
Patents. A patent is a property right granted by the U.S. government that provides a company with exclusive rights to an invention or process for a period of 20 years. Companies obtain patents from the United States Patent and Trademark Office (“USPTO”) and the costs start there. Filing fees start around $300 and add up for extensions and maintenance fees charged over time. A single patent could easily cost $5,000 to $10,000, just in fees, over the life of the patent. This does not even include attorneys’ fees. Attorneys’ fees generally cost between $10,000 and $20,000 for filing and increase over the 20 years of the patent.
Trademarks. A trademark is a word, phrase, symbol, or design that identifies and distinguishes the source of the goods of one party from those of others. It is also obtained from the USPTO. Upfront filing fees range from $250 to $400 and there are ongoing maintenance fees as well ranging from $125 to $425. This does not even include the trademark search that should be run at the outset to ensure the mark is not already in use. A comprehensive search can cost between $2,500 and $4,000. Attorneys’ fees for filing vary, but could cost between $500 and $1,000.
Copyrights. A copyright is a property right given for “original works of authorship.” A typical copyright for a business might be for a website. Copyrights are not “free,” since there are filing fees due at the outset to the U.S. Copyright Office. The fees are fairly modest. An online application costs $55. The attorneys’ fees for the application are usually nominal or nonexistent in some cases as certain applications can be handled by non-attorneys.
Trade secrets. Trade secrets are broadly defined by statute and by way of example. It can range from various types of information (financial, business, or scientific) to patterns, formulas, and processes to computer code and software programs. Any of the foregoing may be a trade secret so long as it (1) has “independent economic value”; (2) is not “generally known” or “readily ascertainable; and (3) is kept secret using “reasonable measures.”
Trade secrets do not obtain protection by filing an application with a government agency and paying fees. Instead, they are protected by statute. Companies simply have to follow best practices to comply with the federal Defend Trade Secrets Act (“DTSA”) or applicable state law. These best practices must keep trade secrets … secret. The DTSA refers to this as “reasonable measures to keep [the] information secret.”
What Measures Are “Reasonable”?
Whether a companies’ measures to maintain secrecy are reasonable of course depends on the trade secrets. Do the trade secrets consist of intangible information, such as a customer list or pricing guide? Or are they tangible in nature such as manufacturing equipment or blueprints? While both intangible and tangible property may be protected as trade secrets, the measures taken to maintain the secrecy could be very different. The former may require restricting access to computers and password-protecting files, whereas the later may require a company to restrict access to certain areas, require security badges, or monitor locations with security cameras.
Even so, there are certain basic best practices that every company should follow to protect trade secrets regardless of form or type. It should require any employee who comes in contact with trade secrets or has access to them to sign a nondisclosure agreement. The company should limit the number of people who know about the secrets. It should have policies and procedures in place to protect information. It should monitor the secrets and periodically review and measure the effects of its secrecy efforts. The company should take corrective action and administer discipline to any employee who is not following the prescribed procedures. Finally, companies should have mechanisms in place to swiftly identify trade secret theft so prompt action can be taken if this were to occur. These are only some of the reasonable measures companies can and should be taking to protect their “free” IP.
Lastly, a company should not overlook the value of taking the time to identify its trade secrets. A business does not want to be in a situation where it is deciding with its outside counsel what information it owns that is a trade secret after the information has been stolen by an unscrupulous employee and it is preparing to file a lawsuit. Moreover, when trade secrets are not identified a company might be wasting resources by overprotecting all of its information, even though it may or may not be entitled to protection. Companies should instead spend their time and resources, ex ante, to critically analyze whether its “trade secrets” are in fact trade secrets as defined by the statute. They can then narrowly tailor reasonable measures to protect trade secrets that are valuable and qualify for protection.
In sum, companies should be implementing best practices to protect their “free” IP. Only after reasonable measures are taken and implemented will this valuable intellectual property obtain protection already provided under federal and state law. Company can implement many of these practices on their own, or consult with a qualified trade secret attorney who could audit the business and/or consult with the company on and through the process.
This article provides an overview of specific legal developments. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.
Kevin Burns is an associate in the Denver office of Fisher & Phillips LLP, representing employers nationally in labor, employment, civil rights, employee benefits and immigration matters. He can be contacted at firstname.lastname@example.org 303.218.3656