Reasonable steps to protect trade secrets are essential

On Behalf of | Feb 24, 2021 | intellectual property & trade secrets

We have discussed the potential risks that remote working poses to a company’s trade secrets on this blog before. Business owners are likely aware of these concerns, since many of their workers are using their home internet, and maintaining digital security can be complex outside the company’s physical boundaries.

However, it bears repeating that business owners must take precautions since a recent case demonstrates the gravity of this particular risk.

Recent case highlights trade secret risks on digital platforms

Even though this case was in Delaware courts, California business owners must take heed and understand the elements of this lawsuit.

Near the end of 2020, Smash Franchise Partners, LLC, filed a case claiming trade secret misappropriation. The company had held open meetings over the popular video-conferencing platform Zoom to discuss:

  • Franchising opportunities
  • Business strategies
  • Growth opportunities

One of the attendees used the information offered in these meetings to launch their own business in competition, leading to the lawsuit. However, the Delaware court ruled against Smash Franchise Partners’ claim.

The primary issue: Failure to take reasonable steps

The World Intellectual Property Organization (WIPO) defines that a trade secret must meet three requirements. Businesses must:

  1. Keep the matter secret, so it is valuable to the business in the commercial world
  2. Ensure only a few people know the trade secret
  3. Take reasonable steps to protect the trade secret and keep it confidential

This last factor is the primary reason why the court ruled there was no misappropriation of trade secrets in this recent case. The company did not take steps to restrict who attended the Zoom meetings. Additionally, they did not treat confidential information differently from non-confidential information. Therefore, the matters discussed could not be considered trade secrets according to WIPO’s rules.

What are the takeaways for California business owners?

This case shows just how important it is for business owners in California and across the country to take precautions and make sure they protect their trade secrets – especially while working virtually. Business owners must take such reasonable steps for two reasons:

  • To prevent trade secret theft or misappropriation
  • To effectively take legal action in cases of misappropriation

Trade secrets are invaluable in the business world. It is critical to learn from matters like this and avoid the risk of damaging consequences and litigation.