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Trade Secrets in Contracts: Key Considerations for Business Agreements

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Trade secrets are one of the most important examples of intellectual property for businesses, both large and small. This is especially the case for businesses that create original flavors, content, or data not produced by their competitors. For example, perhaps the most closely guarded trade secret in the U.S. might be the Coca-Cola formula.

To operate a successful business and pass along duties to your subordinates and partners, you often need to share your trade secrets with them. This may create some concern for business owners and managers – and indeed, it should. Few employees stay with a company forever, and some do not value confidentiality like others. So, how do you protect your trade secrets while also sharing those secrets with your staff and partners?

One of the simplest ways for large and small businesses to protect their trade secrets is to include restrictive covenants in their employment and business contracts. The two most common restrictive covenants for protecting a trade secret are non-compete clauses and non-disclosure agreements (NDAs).

A non-compete agreement requires that, should an employee quit or get fired from your company, they do not work for a direct competitor for a certain length of time. The non-compete agreement would prevent the former employee from supplying your trade secrets to your competitors, thus ensuring that you keep one step ahead of the competition.

An NDA (also known as a confidentiality disclosure agreement or a secrecy agreement) is a legal contract between the company and its employees, partners, and certain visitors or contractors. The NDA outlines the material that must remain confidential until the NDA expires. An NDA is the go-to method for protecting trade secrets from being made public.

For assistance in writing an enforceable contract with a restrictive covenant in place, it is recommended that you work with lawyers proficient in business law. Please contact our law firm to discuss your case in more detail.

What Are Common Examples of Trade Secrets in Business?

To be legally considered a trade secret, the protected information must not be well-known to the general public or professionals in the same trade or industry. To adequately and legally protect your trade secret, you must prove that it is a secret that, if it fell into the hands of your competitors, would give them an advantage and cost you untold losses.

 Examples of trade secrets include the following:

  • Budget information.
  • Business information.
  • Business plans.
  • Customer information, including addresses.
  • Data collections.
  • Engineering information.
  • Financial information.
  • Formulas.
  • Marketing data.
  • Methods.
  • Pending trademark and copyright applications.
  • Pricing methods.
  • Processes.
  • Research and development information.
  • Source code.
  • Supplier information.
  • Unpublished patent applications.

What is the Trade Secret Law in Florida?

Most states, including Florida, have adopted the Uniform Trade Secrets Act. Florida’s Uniform Trade Secrets Act (FUTSA) effectively mirrors the trade secrets act that exists on the national level.

Some cases that have gone to state court have narrowed the broad definitions of ‘trade secrets,’ creating confusion about what is and is not legally recognized as a trade secret in Florida business law.

An exception under Florida law differs from nationally recognized definitions of trade secrets. The Florida Fourth District Court of Appeals interpreted trade secrets to include formulas or compounds of known ingredients and other known components, so long as the combination differs from other methods known in the trade or industry.

If you are concerned about whether your trade secret qualifies under Florida law, please get in touch with our law firm to schedule an in-depth consultation.

What Should Be Included in a Non-Disclosure Agreement?

It is strongly recommended that you allow a seasoned business law attorney to draft your NDA. Your lawyers can better anticipate how the courts interpret the legal document and potentially avoid common issues with other unenforceable NDAs. You need the language in the NDA to be as solid and airtight as possible so that nobody who signs it can find a loophole or weakness to exploit.

Among the many things to be included in your NDA is a detailed description of what information is protected by the confidentiality agreement. Usually, the NDA does not mention the trade secret itself but rather the category of information that the trade secret fits into.

Every restrictive covenant must be considered reasonable to be enforceable. It is wise to emphasize the restrictions and regularly update the agreement to meet your changing business needs and ambitions.

But is this all truly necessary? Yes. If you want to ensure your business’s future success, you need to protect your secrets so that your competitors do not take advantage of the weakness in your business plan. You must consider the benefits of non-disclosure agreements and non-compete clauses to safeguard that future. Employees and other business partners may not appreciate needing to sign such contracts. Still, they are nonetheless necessary for many businesses, and you should strongly consider the advantages of including such restrictive covenants in your business contracts.

Contact Us Today to Speak with Our Experienced Legal Team

NDAs and non-compete agreements are crucial to protecting your business’s trade secrets from being known by your competition or the general public. However, many such restrictive covenants are difficult to enforce in court because they are deemed unreasonable or poorly constructed. In order to avoid that possibility, contact Lankford Law Firm and work with one of our experienced business law lawyers.

Our law firm has extensive experience serving clients all over Central Florida with their legal business matters. We do not merely see ourselves as temporary lawyers hired to meet a need but rather as your new legal partners, there by your side as you pursue your goals into the future. To schedule your in-depth case evaluation, please call 850-888-8992.

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