subject: Protecting Confidential Information in the Digital Age [print this page] Protecting Confidential Information in the Digital Age
Trade secrets are the lifeblood of many businesses. In many cases, trade secrets separate a business from its competition a leak or misappropriation can mean the migration of customers and revenue from one business to another, or allow a competitor to establish a market presence without the cost of developing the valuable information.
Protecting trade secrets is increasingly difficult in the digital age, with confidential information stored, send and received electronically. However, the greatest security risks are often not technology issues, but simple human behavior. As such, it is important to identify what constitutes a trade secret and what protective measures must be taken by businesses to ensure their value is maintained.
Minnesota Trade Secrets law can be boiled down to three essential elements: (1) that the information is not generally known or readily ascertainable; (2) that the information derives independent economic value from secrecy; and (3) reasonable measures have been taken to maintain the information's secrecy.
Not Generally Known or Readily Ascertainable
Information that is generally known to the public is not given trade secret protection. For example, a list of names and addresses compiled from the phone book will not rise to the level of a trade secret. And, while a customer list of names and addresses may not be a trade secret, a highly detailed customer list containing information relating to bidding, purchasing and/or sales strategy would more likely be afforded trade secret status. This type of information could not be easily recreated in a short period of time.
The issue of determining whether or not information is generally known or readily ascertainable is an issue of fact depending on a number of matters including the time and skills that went into creating the information as a piece of property, the complexity of the information, and the investment that a business may have put into creating or compiling the information.
Independent Economic Value from Secrecy
A party asserting a trade secret must show that the trade secret provides a competitive advantage. This advantage is not required to be realized, but there must be some ability to forecast the amount of success or economic value expected from the information. Old or obsolete information is not provided trade secret protection if it no longer can be reasonably calculated to provide actual or potential value. Again, this is a fact intensive situation with a greater weight of authority placed on sales data and other information showing actual economic value versus potential economic value.
Reasonable Efforts to Maintain Secrecy
The level of care taken with information is often the determinative factor and most difficult hurdle for a business to overcome when asserting a trade secret claim in the digital age. For example, a locked file cabinet by itself should no longer be considered a comprehensive security measure; companies must be vigilant to the many inherent external and internal threats to electronic data that is accessed, manipulated and disseminated through multiple channels.
So, while the law requires "reasonable efforts," cases have shown that the standard appears to be slightly more than "reasonable" and tends to require "reasonable prudence," when looking at all of the circumstances involved. This concept continues to evolve in the digital age given the increasing availability of access channels.
Aside from maintaining the legal status of information as a trade secret, it is also good practice to follow the following suggestions to promote healthy and predictable outcomes with sensitive business information:
Stamping or marking documents or other information as "Confidential."
Providing clear directives to employees regarding trade secrets and confidential business information through employment agreements, nondisclosure or non-compete agreements, handbooks and memoranda
Limiting knowledge and access to employees and others on a "need to know" basis.
Only sharing information with vendors and business associates through well-crafted nondisclosure agreements.
Creating and instituting password or passcode entry to physical spaces and/or to computer files containing sensitive information.
Ensuring data backups are secure from external access and manipulation.
Securing wireless networks, and implementing firewalls and intrusion detection systems to keep external intruders out.
Tracking user access to confidential data and creating rules for the transfer or copying of said data from the network.
While businesses that maintain their trade secrets can avoid litigation merely by the measures they institute, remember that security breaches can come from many directions. Contact us at 612-746-2560 for more information or assistance in developing or reviewing your company's strategy for protecting confidential information. Visit us at www.skjold-barthel.com.
