Building culture of confidentiality: How start-ups foster environment of trade secret protection

By Omoruyi Edoigiawerie, Esq

Start-ups thrive on innovation and new ideas and often have confidential information that is critical to their success.

Trade secrets are one such form of confidential information and can include anything from customer lists to manufacturing processes to software algorithms.

Protecting your start-up’s trade secrets is therefore essential to maintaining your competitive edge and ensuring long-term success.

One of our clients at Edoigiawerie and Company LP shared a story with us of how he employed a staff who unbeknownst to him was a competitor, this person came worked for six months learning all there was to learn about his business and resigned to float a similar business.

This gave our client a serious headache, but thanks to the work we do at the firm, he’s wiser and wouldn’t fall into such employment errors a second time. But his experience is a real one, and a lot of start-ups are grappling with this challenge and for some, it is their biggest albatross.

So, this week, we will discuss the importance of trade secrets for startups and why it is important to foster an environment where trade secrets are protected.

*Why should a start-up protect its trade secrets?
Trade secrets are a form of intellectual property that can give your start-up a competitive advantage. By keeping your confidential information out of the hands of competitors, you can maintain control over your ideas, technologies, and other valuable assets. This can help you stay ahead of the curve and drive growth for your business.

Protecting trade secrets is essential for any start-up looking to remain competitive in today’s market. There is a need for companies to take steps to ensure their confidential information remains safe to maintain their edge over other businesses.
Additionally, protecting trade secrets allows a business to remain independent and make decisions based on its interests instead of being influenced by external factors.

I often say that for startups to control their trajectory and remain independent from competitors they must have a firm grip on their trade secrets. By keeping certain information secret, the company can remain independent and make decisions based on its interests instead of being influenced by other companies. This helps to ensure the company’s long-term success and profitability.

However, trade secrets can also be easily compromised if they are not managed and secured properly. A data breach or employee theft can result in the loss of valuable information and put your start-up at risk. Therefore, protecting your trade secrets should be a top priority for any start-up looking to stay competitive.

*Identifying trade secrets
A trade secret is a type of intellectual property that can provide a significant competitive edge for a business. Such secrets can help a start-up achieve a competitive edge by providing an exclusive advantage over its competitors who lack access to this information.

Identifying what constitutes a trade secret in any start-up is an important step in properly protecting the company’s proprietary information. Trade secrets are typically defined as information that has economic value due to its secrecy, is not generally known or readily ascertainable, and is subject to reasonable efforts to keep it confidential.

When it comes to identifying what constitutes a trade secret in a financial startup, it is important to consider the various types of information that could be considered confidential. For example, this could include customer lists, pricing and commission data, product development plans, marketing strategies, financial performance data, and other internal information.
Ultimately, they include any information capable of giving the start-up a competitive advantage, these include:

• Manufacturing processes
• Software algorithms
• Marketing strategies
• Customer lists
• Company internal policies
• Product designs and prototypes
• Financial information

Once you have identified your trade secrets, it’s important to keep them confidential and limit access to those who need to know. This can include using password-protected files, limiting physical access to sensitive information, and implementing strict data access controls.

*Managing trade secrets
In addition to identifying your trade secrets, it’s also important to manage them effectively. This includes implementing policies and procedures to ensure that your confidential information is always protected.

One effective strategy is to implement a trade secret management plan, which outlines the steps your start-up will take to protect its confidential information. This can include regular training sessions for employees on the importance of trade secrets, as well as legal and administrative policies on data security and information management.
It’s also important to limit the number of people who have access to a company’s trade secrets. This can include implementing data access controls and non-disclosure agreements for employees and contractors who have access to confidential information.

*Securing your trade secrets
Finally, securing your trade secrets is critical to protecting your start-up’s confidential information. This can include implementing robust cybersecurity measures, such as firewalls, anti-virus software, and data encryption. It can also include regular data backups and disaster recovery plans to ensure that your trade secrets are not lost in the event of a data breach or other incident.

Another effective strategy for securing your trade secrets is to implement physical security measures. This can include using secure file cabinets, limiting physical access to sensitive areas of your office, and implementing pass-worded access to data and materials.

*Practical approach to safeguarding trade secrets
It is important to protect your trade secrets, as they can be valuable assets to your business. Implementing physical, technical, and administrative measures can help ensure that your trade secrets remain secure.
a) Physical safeguards
Physical safeguards are the most straightforward type of protection for trade secrets. From restricting access to any physical documents or systems that contain confidential information to reducing the number of employees who can access it, it is important to note that control plays a pivotal role in managing trade secrets.

It is advised that access should be granted to only those individuals who need the information to perform their job for the company. Therefore, the company should ensure that all documents, equipment, and materials are properly filed away and securely kept when not in use.

b) Technical safeguards
Technical safeguards for trade secrets should also be implemented. This includes using secure networks and servers to store any confidential files. Access to these networks should be restricted using passwords or other authentication methods. Additionally implementing firewalls and other security measures to reduce the risk of unauthorized access from outside sources is also important. Encrypting any sensitive data is also wise, as this will help protect it from being read by unauthorised individuals.

c) Legal and administrative safeguards
Startups should also implement legal and administrative safeguards to protect their trade secrets, this is particularly important to prevent idea exploitation from former employees. To achieve this, it is important to set up policies and procedures around how confidential information is handled and stored within the business. Some key legal documents that will help achieve this include:

• A non-disclosure agreement (NDA): employees, contractors, and consultants should be made to sign a non-disclosure agreement that prevents them from disclosing a company’s confidential information.

•Non-compete agreements: employers should ensure that employees, contractors, and consultants sign a non-compete agreement to prevent them from entering into competition when their employment/service agreement ends.

•Controlling the accessibility of important documents
• regular employee training on data protection and security best practices to ensure that everyone is aware of their responsibilities when it comes to protecting trade secrets.
It is also important to have a robust system in place for monitoring and auditing access to any sensitive data or material.
Overall, implementing physical, technical, and administrative safeguards is key when it comes to protecting a start-up’s trade secrets.

*Conclusion
Protecting trade secrets is especially important for startups as they often rely on unique and innovative ideas and processes to gain a foothold in the market. Startups should take steps to identify their trade secrets, limit access to sensitive information, and implement physical and digital security measures to prevent unauthorized access.

While protecting trade secrets can require significant investment and effort, it is a crucial aspect of safeguarding a start-up’s competitive advantage and long-term success. By taking proactive measures to protect their trade secrets, startups can avoid the risk of intellectual property theft and maintain a strong position in the marketplace. After all, when the company’s trade secrets are protected, the business continues to thrive which is the goal of every start-up.

Omoruyi Edoigiawerie is the Founder and Lead Partner at Edoigiawerie & Company LP, a full-service law firm offering bespoke legal services with a focus on startups, established businesses, and upscale private clients in Nigeria. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. His firm can be reached by email at hello@uyilaw.com