Playing Fair: Protect Trade Secrets from Business Partners

Mintz - Intellectual Property Viewpoints

Mintz - Intellectual Property Viewpoints

Collaborating with other companies on new products, services, and promotions can help businesses boost revenue and increase their visibility, but one downside of such projects is the possibility of exposing trade secrets to business partners.

Given this threat, it is important to have non-disclosure agreements in place with any business partner before any trade secret information is shared with anyone outside your company. Most companies do not want to steal other companies’ trade secrets, and open communication with competitors can also help both sides quickly resolve situations involving misappropriation, possibly avoiding costly and drawn-out litigation. In a famous example that ended in convictions for three co-conspirators, PepsiCo, Inc. reached out to The Coca-Cola Co. and passed along a letter they received that offered information about Coca-Cola’s confidential drink formulas. Coca-Cola, in turn, contacted the Federal Bureau of Investigation, which conducted an undercover probe that led to the arrests of the accomplices and criminal convictions.

Agreements with business partners concerning confidentiality are particularly vital in industries with a lot of employee mobility — or widespread layoffs due to the coronavirus pandemic. Companies with employees working on projects with remote workers at other companies will want to take additional measures to protect trade secrets. Robust confidentiality and non-disclosure agreements with business partners and development partners, as well as clauses that clarify intellectual property ownership in joint development arrangements, can lower the risk of trade secret theft and unauthorized use of confidential information.

Although teaming up with other companies increases the risk that they’ll gain unauthorized access to confidential information, making fair-play pacts with partners and competitors can go a long way toward curtailing the improper use of trade secrets.

In the next blog posting in our ongoing series on trade secrets, we’ll review how to minimize the threat of trade secret litigation when hiring an employee from a competing company.

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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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