A trade secret can be a variety of things: an internal strategy, secret formula, customer list, or software application; anything that makes your business unique or gives you an edge over the competition. It’s important to safeguard your business’s trade secrets properly because theft can deal a serious blow to your bottom line.
An experienced business attorney can help you develop secure features to protect your trade secrets—or, to pursue litigation aimed at stopping another business from profiting from your hard work.
Understanding State and Federal Protections
As business assets, trade secrets are protected by both state and federal laws. Theft of intellectual property, such as a formula or design, is treated similarly to theft of a critical piece of equipment. The laws provide for several potential avenues to consider if trade secrets are stolen, including criminal or civil charges, or injunctive relief in state or federal court.
The Wisconsin Uniform Trade Secrets Act (WUTSA) covers businesses as long as the following criteria are met:
- The item or formula must not be generally known or discoverable by average or typical means.
- The owner must make efforts to keep it secret.
- It must meet the legal standard of being a device, method, technique, process, or information (such as intellectual property).
In Wisconsin, it’s a Class 1 felony to knowingly take, transfer, or retain a trade secret without permission. That’s a criminal offense, but there may be an opportunity to pursue such a case in civil court instead.
In addition, the Defend Trade Secrets Act provides businesses the opportunity to sue in federal court if their product or process is stolen. Its application is broad, applying to any companies doing or intending to undertake interstate or foreign commerce.
Preventing trade secret theft is paramount. The best approach is proactive, including creating safeguards against employee theft or misappropriation, misuse by clients or customers, and accidental breaches. This can include:
- Requiring nondisclosure agreements from clients and customers and noncompete agreements from employees
- Training employees on security protocols
- Developing a security perimeter for the secret(s) by limiting the number of people with access
- Advising employees who leave the company on legal implications
- Create and maintain records that show the development of the trade secret and its impact on your business or product
Intentional and proactive security is generally the benchmark that a court will seek when a case about trade secret theft is tried. That means that security must be consistent, well communicated, and the proprietary information kept confidential through controlled access.
If a trade secret is stolen, take the following steps:
- Send a cease and desist letter. This puts the competitor on notice that their use of your product, method, recipe, or other trade secret infringes on your ownership rights.
- Investigate to determine how the secret was leaked or stolen. Tighten security to make sure others do not benefit from it. Change passwords, reinforce access and dissemination policies, and tighten security.
- Discuss litigation or other means of recovering the value of your asset with your business attorney. A lawsuit is a long, expensive process; are there other options available, such as mediation?
A strong internal culture of confidentiality that includes specific training, well-established policies, and legally enforceable agreements reduces the potential for theft and improves your ability to enforce your rights in court.
Why this matters for Wisconsin businesses
Developing an effective, unique product and building a business around it requires significant effort. The theft or misappropriation of any part of your formula, method, or process must be taken seriously. The legal team at Kerkman and Dunn, experienced business litigation attorneys, are the people to call when this situation arises.
