An Ounce Of Prevention Is Worth A Pound Of Cure When It Comes To Protecting Your Trade Secrets

Fisher Phillips

Fisher Phillips

Anyone working in the healthcare industry knows the saying: “an ounce of prevention is worth a pound of cure.” It’s one of the most common adages used when discussing the benefits of a healthy lifestyle or the importance of regular preventive care with patients. Unfortunately, many of those same healthcare providers who offer their patients this wisdom are probably guilty of ignoring their own advice when it comes to protecting trade secrets. 

What Is A “Trade Secret” Anyway?

Perhaps the most well-known example of a trade secret is Coca-Cola’s secret formula—reported to be so valuable that The Coca-Cola Co. has kept it locked away in a special vault for over 125 years. Under modern legal standards, however, just about any type of information that gives your business an edge over its competitors can be a trade secret. 

The Defend Trade Secrets Act, a federal law enacted under the Obama administration in 2016, states that “all forms and types of financial, business, scientific, technical, economic, or engineering information” can be considered a trade secret, as long as the information meets two conditions. First, the owner of the information must take “reasonable measures” to keep it secret (a special world-famous secret vault is not necessary). Second, the information must have independent economic value based on the fact that it is not generally known or not readily ascertained by others.

Courts Have Held That Patient Lists And More Are Trade Secrets

Various healthcare-related information can be legally protected as a trade secret, provided it meets the necessary statutory definition. Courts in New York, Illinois, Washington, Ohio, Pennsylvania, and Delaware have found healthcare providers’ patient lists and appointment schedules to be trade secrets.  

While they acknowledged that a private medical provider’s patient information is not something that is typically available in the public domain, these courts noted that the information found in such lists—which usually includes patient names, mailing addresses, medical diagnoses, treatment codes, and insurance-related information—can be extremely valuable to other doctors seeking to start or expand a medical practice. Thus, as long as the provider has taken reasonable measures to keep that information confidential, courts have not hesitated in finding that patient lists are entitled to trade secret protection.

Other healthcare-related information that could potentially be considered a trade secret includes billing and collection rates, fee schedules, medical protocols, surgical techniques, financial statements, marketing plans and strategies, contract rates for managed care plans or insurers, vendor and supplier lists and contracts, and referral resources.

Why Should You Protect Your Trade Secrets?

Given the rapid evolution of the healthcare industry, it has become increasingly important for businesses to protect any information that could offer a competitive advantage. Trade secret laws can provide healthcare employers with valuable protection in this regard by preventing your competitors from gaining access to the secrets to your success. 

A competitor who is able to access your fee schedule, for example, could use that information to undercut your rates and expand their market share, perhaps even taking portions of yours. Likewise, a disgruntled physician from your organization could copy your patient list and use it to solicit patients when establishing their own competing practice.

If you protect such information as noted above, you can ensure the conditions are met for the information to be considered a trade secret, giving your organization grounds to seek relief in the form of a temporary restraining order or preliminary injunction. And, unlike other forms of intellectual property, there are no time limits placed on the protections afforded to trade secrets. As the information remains confidential, the safeguards can be kept in place indefinitely.

Top 10 Best Practices For Healthcare Employers

Since confidentiality is the linchpin of trade secret protection, it is vital that you take steps to protect your organization’s information before it walks out the door. Here are the ten most urgent steps you can take to ensure your organization’s trade secrets will be protected:

  1. Require any employee whose job allows them access to trade secrets or other confidential information to execute nondisclosure and noncompetition agreements.
  2. Include a strict confidentiality policy in the employee handbook that incorporates a list identifying all information and materials that your organization considers confidential.
  3. Include nondisclosure provisions in every agreement with a vendor or independent contractor who could potentially access confidential information.
  4. Place a red “CONFIDENTIAL” stamp on any documents or hard copies that contain information that should be treated as such.
  5. Store confidential documents in locked file cabinets and restrict physical access to any rooms used as storage for confidential information.
  6. Shred any copies of documents containing confidential information when disposing of them, rather than using the trash or recycling bin.
  7. Use password protection for computer systems used to store confidential information.
  8. Ensure the password is granted only to staff who have a legitimate business purpose for accessing confidential data.
  9. Conduct exit interviews with departing employees to remind them of their confidentiality obligations.
  10. Require departing employees to sign a statement certifying that they have returned all confidential documents and information they received or otherwise obtained during their employment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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