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Paul Zimmerman
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Trade Secrets -- Protecting What Matters Most

California businesses invest significant resources to develop their customer lists and client data. However, most businesses fail to take steps to protect that information because of the mistaken belief that such information is automatically protected "trade secrets.” In California, a business is required to take certain basic affirmative steps to ensure that their client information fits within the definition of a trade secret. Failing to take those steps can put the confidential client information at risk. 

Valuable customer lists and related information are considered trade secrets if they are kept secret (generally not for public consumption) and if the business takes reasonable steps to safeguard the confidential client information. What may surprise some is that the greatest risk of theft of the information does not come from a competitor, but from the company's own employees. In order to maximize protection of the confidential information, businesses should take the following affirmative steps:

  1. Establish Security: This is one of the easiest steps to take. Make sure that electronic access of your customer data are on a secured server that can be accessed only with a unique log-in credential, and that only persons that need to use that information are given access.
  2. Signed Agreement: As a part of every new hire package, make sure that all employees sign a confidentiality and non-disclosure agreement. That document, which can be as short as one page, should specify the type/kind of information and documents that the business intends to be kept confidential.
  3. Employee Education: A confidentiality and non-disclosure agreement is only effective if the employee knows what it means. On an annual basis, each business should have a meeting with its employees to discuss the importance of maintaining the confidentiality of customer data. 
  4. Exit Protocol: When an employee leaves the business, make sure you have the person confirm that they are not taking any confidential information, and remind the individual of the confidentiality and non-disclosure agreement that was signed.

Every day, employees attempt to steal company trade secrets. Some efforts to steal are detected through security protocols before the employee can take the information for his/her own personal gain. Taking the aforementioned steps to protect trade secrets will greatly mitigate the risk that your trade secrets get stolen. 

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.