Valuable But Often Overlooked Assets Many Founders Fail to Protect

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Protecting Trade Secrets for Startups

Is your startup gaining traction, resonating with users and growing month after month?

It could all go away tomorrow simply because you are not protecting your trade secrets.

Before you know it, your secret formula for success is copied by a competitor, and you can say goodbye to that growth.

What Is a Trade Secret?

Is there a unique process or procedure that your company uses? Maybe you have certain policies in place to ensure quality. A trade secret is your secret sauce formula for success that nobody else does.

They are intangible as your competitors can’t reverse engineer them by dismantling your product. They can’t be discovered by sifting through the front end code on your website.

Most startups either pay very little or no attention to their trade secrets. To protect your burgeoning business, there are a few steps you need to take.

Identify Your Trade Secrets

There should be a few different elements you use to protect your startup’s intellectual property.

  • Trademark- This protects the name of your product, company, and logos
  • Patents- This is for your hardware, software, and any other product innovation
  • Copyright- Protects your original works such as source code

To have a right to enforce these protections you have to file publicly. Trade secrets work a little differently though.

For example, Apple owns a patent for Siri that explains her purpose and functionality. However, it doesn’t explain exactly how the voice processes your request and produce an answer. This part is an Apple trade secret.

Is It Patent Worthy or a Trade Secret?

Only you can decide if you are willing to file your patent publicly or if your methods should be a trade secret. A good rule of thumb is to ask yourself this question:

Would you be able to tell if a competitor copied your tech?

If you answer yes, then you probably have a patent on your hands. If the answer is no, then your best course of action is a trade secret.

Look at your technology and decide how easy it is to reverse engineer. The harder it is, the more likely it is that you have a trade secret. A patent will publicly hand over the keys to the kingdom.

Google has used this strategy well. They have never patented their algorithms. Everyone can see the data going in and out, but not the processes in the middle. 

Define Your Trade Secrets

Now that you know what your trade secrets are, you need to run the “need to know” test. Evaluate each employee on the team and decide if they really need to know the secret recipe to do their job to the fullest.

If they do, do they need to know the full recipe? Failing to put in protective precautions will make it impossible to defend your secrets in court.

Create a document that clearly defines what you consider your startup’s trade secrets. You then need to have the employees on your need-to-know list sign an NDA. These employees need to know what is regarded a trade secret and therefore they need to keep secret.

Label Your Trade Secret

Anything that you have determined to be a trade secret needs to be marked as CONFIDENTIAL. This means every internal document from email correspondence to file folder to an element of source code.

If you can password protect these documents, that is even better. This will limit the access your employees have.

Check to see if your cloud-based storage services offer password protection on the individual files. This will help limit access.

Consider using a “black box” method for your secret source code and data. Only the developers that need to know can interact with your key trade secrets. Your overhead may increase a bit, but this extra precaution could mean the difference between keeping your secrets yours and then getting out.

Keep Your Secret Safe

Just like Google’s algorithm, your trade secrets are not static. As your business grows, you will add to and develop your current trade secrets. Create a system to protect these new additions.

Make it a habit to set aside time to update necessary documents and inform employees of changes.

Hope You Don’t Have to Enforce

Once your secrets are out, there is no going back. That makes it all the more vital that you protect your secrets from the start.

You do have some legal recourse if a former employee violates your NDA. The Defend Trade Secrets Act of 2016 gives owners of trade secrets the ability to file a private civil suit. The claim would be a misuse of trade secrets and theft.

Contact us today and let us help you protect your trade secrets.

Andrew Rapacke

Andrew Rapacke

Andrew Rapacke is a registered patent attorney and serves as Managing Partner at The Rapacke Law Group, a full service intellectual property law firm. If you would like to speak with Andrew Rapacke, click here to schedule your free consultation.

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