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An individual, start-up business, or established company may have an idea or concept that is unique but not otherwise protectable by a patent. This can include a business model, formulas, recipes, processes, product concepts, marketing plans, unique sources for supplies, assembly processes, or customer lists (collectively referred to as “trade secrets”).
The protection of your trade secrets is essential to maintaining a competitive advantage. How can a start-up business protect its Trade Secrets? As the name suggests, the subject of a trade secret must remain secret and there must be adequate measures to protect the secrecy. That means it must not be public knowledge or of general knowledge in the trade or industry. If the secret is disclosed through authorized means or there are not adequate measures to guard the secrecy competitors can take advantage of the trade secret. But if there is an unauthorized disclosure and use of a trade secret, there are strict criminal and civil penalties. (Note: If you are an employee, it is important not to disclose a trade secret, here is a summary of the criminal risk) What are adequate measures for protecting a Trade Secret? While there are no fixed rules as to what are “adequate” measures, there are best practices that must always be followed: 1. Never disclose confidential information, to anyone who has not signed a nondisclosure agreement or without a confidential relationship. 2. Have password protection on all software that contains Trade secrets and limit an employee or contractor’s ability to place the trade secrets on a personal computer. 3. Maintain a policy that all business records must be returned after separation with an employee or contractor. 4. Never disclose any aspect of the trade secret publicly. The best practice to ensure your trade secrets are protected is to conduct an annual audit. Through this process, you can identify your trade secrets, determine the steps that can be taken to protect their secrecy, update your company passwords, and test your security measures. In some cases, businesses and customers can develop different expectations about of the cost for goods or services. This can be the product of a simple misunderstanding about the terms and conditions.
The best way to avoid this type of dispute, is to do not allow any money to change hands or work to begin before there is a written agreement, signed by both parties. Within the agreement, make sure there is a clear cost for all services, potential variables on delivery, date of completion, and an objective statement for what services will be provided. Most disputes are based on a misunderstanding on what work was going to be done and what the cost would be. For example, if the company is providing roofing services, the agreement should specify what type of shingle would be provided. If the contract just says "roof replacement," your shingle expectation may be different from the customer's expectation. This protects both sides and sets a verifiable expectation of services. As with all Agreements, the best practice is to have the terms reviewed with legal counsel. Why is this important?
When a person has a medical need, there are symptoms which physically manifest as a warning. There are also preventative check-ups which are used to limit future risks. When businesses have a legal need, it can be hard to recognize the symptoms or circumstances where preemptive action is necessary. When a legal problem does present itself, the cure is always more costly and time consuming than prevention. How does a business owner know what legal questions he or she should be asking? Business owners focus their work on maintaining a profitable and sustainable company. In this pursuit, legal well-being plays a vital role but can be overwhelming when the issues are unknown. To address this universal business problem, I have created a concise (one page) Legal Check-up. This Check-up is written specifically for small business owners to do a self-exam. The Check-up will provide insight into the company's current legal well-being and a road-map for action on future legal needs. Work created by an employee, within the scope of their position, is presumptively the property of the employer. This is called a “Work for Hire” creation. It is best to have the scope of employment clearly defined so there is no confusion on this point.
The same is not true for Independent Contractors, Freelancers, or Consultants. For these outside contractors you will need a Work for Hire Agreement to ensure you own all rights to the work created. A Work for Hire Agreement only applies to contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas. For more information: http://www.copyright.gov/circs/circ09.pdf. No. There is a common misconception that anyone can be made into an independent contract. That is not true. Further, there can be serious repercussions if you mislabel someone an independent contractor who is not one. Whether a person can be an independent contractor v. an employee generally relates to the degree of control the owner has
Before making the decision to hire or contract for the first time it is best to work with qualified counsel. There needs to be a clear agreement between the company and the contractor and assessment to determine if the person can even be a contractor. If you have an independent contractor now and want to see if you are in trouble or in compliance you can do an evaluation using IRS form SS-8. Here is a link: http://www.irs.gov/pub/irs-pdf/fss8.pdf |
Elliott Stapleton Attorney with CMRS Law
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