Protecting your company's business trade secrets is a vital step to keeping the advantage your company holds over its competitors. Owners of a valid trade secret have the right to prevent others from using their valuable information and in some cases, to collect money damages for illegal use. For this reason, it is important to recognize the types of information in your business that constitute trade secrets and what steps your company should take to protect them.

A trade secret is any type of information used in your business that is not generally known to the public. They give your company an advantage over its competitors by virtue of the fact that other companies do not use or know of this information. An important factor to consider when determining the status of company information as a trade secret is whether or not the information is actually kept secret. In essence, the information must be protected such that, except by the use of improper or illegal means, a competitor would have great difficulty acquiring it. If your company itself does not take basic steps to protect its secrets, courts will later refuse to offer the company protection under the law when competitors begin to use this valuable information.

Identifying the trade secrets that your company has is the first step in protecting them. Obvious examples of trade secrets include product design, proprietary software and manufacturing processes. But trade secrets are also found in other information that the company expends great time and resources to develop. Customer lists, strategic business or marketing plans and proprietary development or production methods are all examples of potential trade secrets your company has worked hard on to maintain an edge over the competition. They can also arise out of a company's failures; for example, unsuccessful research and development efforts constitute valuable industry information.

Once you have identified your company's trade secrets, it is necessary to develop a program to protect them from misappropriation by competitors. When developing your company's program, choose from the methods outlined below that are reasonable in light of the nature of your business and the trade secrets being protected.

• Designate documents containing trade secrets as confidential. This is the easiest and most cost-effective way to protect your proprietary information. Mark all trade secret materials with a clear and noticeable proprietary legend. Be sure to mark only those documents that the company considers important trade secrets. They will lose legal protection if every company document is considered confidential.

• Create physical barriers to trade secret disclosure. The surest way to block physical access to trade secret materials is to separate this information from other non-proprietary information by keeping it in a locked file cabinet. Restrict access to computer files that contain trade secrets by implementing password protection or removing these files from the company network. Physically destroy documents that contain highly sensitive information on a regular basis.

• Limit disclosure of the company's most valuable trade secrets to employees only on a need-to-know basis. Determine whether employees should have full or partial access to customer lists, technology descriptions and prototypes. Number trade secret documents distributed to employees and require that all copies be returned within a set period of time.

• Educate your employees on the importance of trade secret protection. This is a vital part of any trade secret program as current or former employees perpetrate the majority of trade secret theft. Distribute the company's trade secret policy to all new employees and strictly enforce this policy. The policy should govern the transfer of trade secrets from the company premises via modem, laptop computer or other methods. Distribute newsworthy stories of trade secret theft to employees to remind them of their continuing obligation to maintain secrecy.

• Use non-disclosure agreements with employees, consultants, independent contractors and potential business partners that receive or have access to trade secrets. The non-disclosure agreement should not only restrict the unauthorized disclosure of your company's trade secrets, but it should also prohibit employees from bringing confidential information of former employers onto company premises. Always remind departing employees during their exit interview of their continuing obligation to maintain the confidentiality of the company's proprietary information.

• Monitor competitors. Actively monitor the markets that your company moves in and especially your company's direct competitors for signs that trade secrets have been disclosed and exploited.