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back to index backAMERItalk November,  2005

Trade Secrets - What Companies Should Do To Protect Them

DETROIT – What are trade secrets under Michigan law and what should companies do to protect them?

Phillip Korovesis, a shareholder in Butzel Long's Detroit office, who chairs the firm's Non-Compete and Trade Secret Practice Group, answers these and other questions about Trade Secrets in a mini interview with Mitechnews.Com Editor Mike Brennan.

The full Q&A follows:

Question: Who should be concerned about protecting trade secrets and what industries are most at risk?

Answer: Any company, regardless of size, that relies on confidential information or trade secrets. Formulas, processes, confidential info about customers, buying habits, needs all prove valuable to a competitor.

Question: What is a trade secret under Michigan law?

Answer: Under the Michigan Uniform Trade Secret Act, a Trade Secret is anything that derives economic value from not being known and ascertainable by proper means by other persons who could obtain economic value from its disclosure or use, and that is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Question: What measures can businesses take to protect their trade secrets?

Answer: Getting employees with access to this information to sign non-disclosure and non-compete agreements.

Question: What can business do from both from a pre-litigation and post-litigation standpoint to protect their trade secret information?

Answer: Get your employees with access to critical information to sign agreements to not use or disclose this information outside of their jobs during employment. Also, after they leave, require that they keep it confidential. Non- competes could also be used where most sensitive information is concerned. For example, in cases involving sales reps, the information might include your company's pricing. You might want non-competes for a salespersons so one year after he or she departs your company, he or she won't work with your direct competitor armed with your knowledge. A Trade Secret can also, of course, include customer information.

The statute that applies states that the non-compete agreement must be for a reasonable amount of time.

What the courts have interrupted that to mean is about one year. I've seen them enforced as long as three years. If the non-compete involves the sale of your business, courts are more likely to enforce for longer period of time. It all depends on the business.

After you're in litigation, what do you do? The answer is move swiftly and strongly. If someone goes to your competitor armed with your information, don't sit on your hands. The longer you wait, the more likely the court believes that the information is not that important.

You've also got to be consistent. You've got to go after all of the violators. If you have these agreements, you ought to be consistent in how you react. My advice is move strongly. Be aggressive. Act swiftly.

If you have a non-compete agreement, file suit on the agreement to make sure that the former employee doesn't go to that other employer or use that information to gain competitive advantage against your company. You can enter an injunction to stop them from using your Trade Secrets.

In another scenario, if you don't have a non-compete agreement, you can bring a claim under Michigan Uniform Trade Secret Act. The steps under that act require, in part, that you show the judge that if your ex employee goes to that other employer, he would use or disclose (or already has used or disclosed) your protectible information. You would seek an injunction to keep him from doing that. You might recover damages, but what you're really trying to do is stop the use or disclosure of your sensitive information.

Question: In light of the above, is my business protected?

Answer: What we need to do is evaluate what kinds of information you consider trade secrets or valuable and then figure out what to do to protect it. We need to do an audit of where you stand and what you're doing to protect it.

Question: How can I maximize my business' protection?

Answer: Take a snap shot of where you are and what you do and see where there are holes. If there are holes, you plug them. If you don't have non competes, you decide if you should have them. We conduct an audit of the information and figure out what needs to be tweaked, which needs should be overhauled and figure out what avenues you should take to protect that information.

Source: and Butzel Long - GAI

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