What Is Trade Secret Misappropriation: Is Your Business at Risk?

No matter what industry you're in, it's important to protect your trade secrets and secure confidentiality.
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KFC’s secret blend of 11 herbs and spices, Burger King’s secret sauce, and Google’s algorithm are all examples of trade secrets. They are things that competitors do not know and, accordingly, provide a competitive advantage.

While it’s easy to name these famous examples, not all trade secrets are so high-profile. Most businesses have trade secrets they take steps to protect, such as the client lists they have built up, sometimes over years and years, and on which they depend on to stay profitable.

So, what happens when these trade secrets are misappropriated? And how can business leaders tell if a business is at risk?

READ — Changes To Non-Compete Rules Also Mean Paying More Attention To Your Trade Secrets

The Law on Trade Secret Misappropriation

Trade secrets generally gain their protection by being “secret” because of how a business manages the information, often through contracts and policies. When violating these contracts and policies leads to litigation, the dispute is usually a state court matter.

However, trade secret misappropriation can sometimes become an issue that is more appropriately resolved in federal courts. This commonly happens when multiple states are involved, like when a business engages in interstate commerce. In this case, 18 U.S.C. § 1839(5) can apply.

Of course, the law is particular and uses specific words that have been extensively discussed in many court cases. Generally, trade secret misappropriation happens when someone improperly acquires a trade secret, improperly discloses or uses it without permission. Misappropriation can occur even if the trade secret was obtained through a mistake or accident, as long as the person who acquired the information knew or should have known that it was not intended to be disclosed by the business.

READ — How to Safeguard Your Business Trade Secrets

Businesses at Risk of Trade Secret Misappropriation

Some businesses are more at risk of trade secret misappropriation than others. Startups are especially susceptible because of their quick growth rate. Often, a startup is created with just a few employees. Because of this, it’s run with fewer formal policies than an established business.

However, by the time formal policies are introduced, one of these employees may have taken action to misappropriate valuable trade secrets.

Reducing the Risk of Trade Secret Misappropriation

There are many ways to reduce a business’s risk of trade secret misappropriation, including developing policies that protect valuable secrets. For example, access can be limited to specific business leaders and protected by passwords. In addition, the secrets can be stored only on secure servers instead of in less secure places, such as laptop computers that can be lost, stolen, or hacked.

Employees and contractors, too, can be required to sign non-compete or non-solicitation agreements that deter them from trade secret misappropriation. If employees or contractors violate these agreements, resolution can sometimes be obtained more cost-effectively by resolving the breach of contract through alternative dispute resolution methods.

The best way to protect a business from trade secret misappropriation is to take these steps and protect the information before it ever leaks. Again, an experienced attorney can guide the company through this process, offering valuable counsel.

For more information about trade secret misappropriation in Colorado, contact Hackstaff Snow Atkinson & Griess, LLC, at 303-534-4317 or visit our website.


Aaron Atkinson, Doug Griess, and John Snow of Hackstaff Snow Atkinson & Griess, LLC, are top Denver business attorneys and litigators with expertise spanning various industries. Specializing in business law, litigation, intellectual property, tax law, and dispute resolution, the firm offers an in-depth understanding and knowledge of general real estate and litigation rules and regulations and are a trusted resource for business owners throughout Colorado.

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