By: George V. Pilat, Esq.
Mazanec, Raskin & Ryder Co., LPA
Every business has valuable information that it wants to keep secret. Whether that information is a “trade secret” entitled to the benefits under Ohio’s Uniform Trade Secrets Act is not always an easy question to answer, and requires effort on the part of the company to keep the secret.
Colonel Sander’s Secret Recipe. The formula for Coca-Cola. Google’s original “search” algorithm. These are a few examples of what we commonly know as company “trade secrets,” and there are many others in every size and type of organization. But there are often misconceptions of what actually qualifies as a “trade secret” under the law and what someone has to do to qualify for legal protection.
Ohio adopted the Uniform Trade Secrets Act in 1994 to achieve uniformity in that area of the law with all other states enacting those statutes. But what exactly is a “trade secret”?
The Act 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:
(1) 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.
(2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
As you can see, a very wide scope of information can potentially qualify as a “trade secret.” Focusing on just one item, there is often a misunderstanding whether customer or client lists are trade secrets. Although such lists are specifically mentioned in the statute, they do not always qualify as a trade secret.
How is that? Well, if they are simply a list of information that could be readily obtained from public information sources (company names, addresses, telephone numbers, etc.), that often does not qualify as something of value for not generally being known, and being valuable to others who could not readily ascertain the information by proper means. So while certain non-public information contained in customer or client lists might qualify as a trade secret, such lists do not always, automatically qualify as a trade secret protected under the Act.
The second part of the definition, being “…subject of efforts that are reasonable under the circumstances to maintain its secrecy” is what causes the most problems for businesses claiming trade secret protection for their valuable information. Material that could qualify as a trade secret is often not afforded that status because a business did not take adequate, or any, steps to safeguard and protect the information from dissemination or disclosure. Just a few examples of reasonable efforts to maintain secrecy include:
- Marking drawings, plans, or documents as “Confidential”
- Restricting access to those with a “need-to-know”
- Password protection on computer files
- Encrypting information
- Locking documents in file cabinets
- Having employees and others sign confidentiality and/or non-disclosure agreements
It certainly is preferable to employ as many safeguards as are reasonably possible, and something is always better than nothing. But not employing any, or enough, safeguards to maintain secrecy could mean the difference between having and not having statutory legal protection for your trade secrets.
Ohio’s Uniform Trade Secrets Act provides protection and benefits to business owners. However, it is not always clear exactly what qualifies as a “trade secret.” More important, even if information is a trade secret, the owner must take steps to protect and safeguard the information from disclosure, or the statutory protection is lost. So whether or not you can “keep a secret” is not as easy as it might sound.
For more information or if you have any questions, contact George Pilat at 440.424.0007 or via email at firstname.lastname@example.org.
About the Author: George V. Pilat is a Partner with Mazanec, Raskin & Ryder. He focuses his practice on business and commercial law, and insurance defense. He is a Co-Chair of the firm’s newly expanded Business & Commercial Law and Insurance Agents & Brokers practice groups. His experience and unique blend of skills includes significant work handling agent errors & omissions (E&O) coverage and litigation, coverage analysis, corporate compliance, commercial transactions, and employment litigation and counseling. He represents national and regional insurance agencies, agents/brokers, and Fortune 500 clients in both state and federal courts.