by Eric D. Morton
Intellectual property (IP) is one of the most valuable—and most misunderstood—assets of a small business. In practice, many disputes arise not because owners fail to care about IP, but because they rely on bad documents, generic contracts, or incorrect assumptions about what the law actually protects. As technology, remote work, and digital storage have transformed how businesses operate, protecting IP has become both more critical and more complicated. In this article, we’ll look at trade secrets and a few other basic things that businesses can do to protect their IP.
Trade Secrets. A trade secret is not simply “confidential information.” Under California’s Uniform Trade Secrets Act, a trade secret must derive a) economic value from being secret and b) must be subject to reasonable efforts to maintain its secrecy. Many small businesses do not understand trade secrets and have bad habits and practices that compromise their trade secrets. These include:
- Agreements that are void.
- Misunderstanding what can be protected and how to do so.
- Unenforceable non-disclosure agreements.
Protecting trade secrets therefore requires more than legal documents. Companies must take the following actions to protect them:
- Identify them. Inventory sensitive information discover what is truly a trade secret and what is not
- Restrict Access. Only individuals with a need to know should access trade secrets.
- Label them. Trade secrets should be clearly marked as trade secrets. Label files, watermarks on documents, etc. People should know they are looking at trade secrets.
- Draft an enforceable
Non-Disclosure Agreement.
- Do not use an overbroad and vague agreement
- Specify the trade secrets: List them in such specificity that there is no question as to what the parties agree is a trade secret. This is particuarly true for highly technical trade secrets.
- The concept is that to have a true agreement that certain things are secrets and are not be revealed.
Copyrights are a source of confusion. Companies sometimes think that written forms or manuals are confidential. They are not unless they contain true trade secrets. When employees take written materials, training manuals, or marketing content to a new job, employers often bring claims under state law. However, copyright law is Federal. If the dispute centers on copying written or visual works, state‑law claims such as breach of contract or conversion will be dismisssed by a California court. A copyright can only be enforced in Federal Court. A copyright registration is also a prerequisite to filing a copyright infringement lawsuit. A company will a great deal of original written or other works should obtain registrations for those works.
Beyond trade secrets and copyrights, basic operational policies can significantly reduce risk. Clear computer and network use policies are essential. Both federal and California law prohibit unauthorized access to computer systems, data, and networks, and violations can result in civil liability, attorneys’ fees, and even punitive damages. Policies should explicitly forbid unauthorized downloads, sharing logins, and accessing systems without permission—and should be enforced consistently.
Finally, business owners must maintain control over websites, domains, and social media accounts. The company—not a developer, employee, or contractor—should own the domain and be the administrator of social media accounts. Poor oversight in this area frequently leads to lost accounts, copyright violations, or false advertising claims.
We recommend the following actions for small businesses to protect their IP.
1.Audit Company Intellectual Property
2.Register Trademarks
3.Register Copyrights
4.Identify Trade Secrets
a.Restrict Access to Trade Secrets
b.Label Trade Secrets
c.Draft and execute enforceable NDAs
5.Computer Use Policy – draft and enforce
6.Understand website and domain details
7. Understand and control social media
Please contact us about any of your IP issues, questions or concerns.
Eric D. Morton is the principal attorney of Clear Sky Law Group, P.C. He can be reached at 760-722-6582, 510-556-0367, and emorton@clearskylaw.com