Most companies believe they have valuable trade secrets that deserve legal protection. But trade secret protection is earned through innovation, investment, time, and human resources; it’s not given, and it is not to be taken for granted. A company typically spends countless hours and incurs significant expenses developing its trade secrets. And, even then, it must maintain the secrecy of its confidential and proprietary information for Ohio courts to find such information is legally protected as a trade secret.
What is a Trade Secret?
Ohio has enacted the Uniform Trade Secrets Act (“UTSA”). The UTSA defines a “trade secret” as: Information, including the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, pattern, compilation, program, device, method, technique, or improvement, or any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following:
- It 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.
- It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Ohio’s Trade Secret Test
Ohio Courts utilize a six-factor test for determining whether information constitutes a trade secret:
- The extent to which the information is known outside the business.
- The extent to which it is known to those inside the business.
- The precautions taken by the holder of the trade secret to guard the secrecy of the information.
- The savings affected and the value to the holder in having the information against competitors.
- The amount of effort or money expended by the owner in developing the information
- The amount of time and expense it would take for others to acquire and duplicate the information.
How to Ensure Your Trade Secrets Are Protected Internally
Companies should make sure their confidential and proprietary information is restricted to individuals inside and outside the organization. Such information should only be disclosed to those individuals on a need-to-know basis. Such individuals should also be bound by a non-disclosure and confidentiality agreement. Company policies, employee handbooks, and manuals are not typically sufficient to replace a well-crafted NDA. Confidential information should be kept under lock and key, to the extent it is kept on paper, and access to electronically stored information and data should be restricted and password-protected. Records should be kept showing the amount of time, money, and energy that went into the creation of confidential and proprietary information that is claimed to be a trade secret. And records should be kept showing the value of such information to the organization.
Misappropriation of a Trade Secret
“Misappropriation” of a trade secret takes place when the (1) acquisition of a trade secret was acquired by “improper means;” or the disclosure or use of a trade secret was made without the express or implied consent of the owner of the information and the person who acquired the information (a) used improper means to acquire knowledge of the trade secret; or (b) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was derived from or through a person who had utilized improper means to acquire it, or was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use, or was derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use. “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.
Companies must therefore guard against the use of improper means by individuals who wish to take their trade secrets. Non-disclosure agreements and other agreements requiring confidentiality are a good start. Limiting access and protecting against unauthorized access are also valuable tools to maintain confidentiality.
If your company’s trade secrets have been compromised, or to seek counsel from our Litigation practice group, please reach out to request a consultation or call us at 216-696-1422.
