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The Price of Trade Secrets


The term "trade secret" conjures up images of Kentucky Fried Chicken's 11 herbs and spices that make up its secret recipe. Or Coca Cola's recipe that is known to only two or three persons in the world. However, these are only examples of a trade secret. There are many other (more mundane, but nonetheless important) trade secrets that are worthy of protection.

If you are a business owner, or work for a business, large or small, odds are good that you deal with trade secrets. Pricing information may be one such secret. Lots of folks may think that pricing information is not a secret, every customer gets an invoice, right? That's not always the case.

If you are involved in competitive bidding, then you know how important pricing data is. If a competitor knows what your bid is on a job, he can undercut you by the thinnest of margins, and snatch up every job because your competitor knows what you'll bid before you do.

That is why it is so essential to guard any formula used to price your goods or services, and only share this trade secret with top level management.

Additionally, you might ask yourself, what is stopping top management from jumping ship and becoming that competitor? How do you keep your trade secrets from walking out the door with that key employee?

It may be wise to get anyone privy to this secret information to acknowledge that it is, in fact, confidential. But, talk is cheap. It's not enough that you want to keep a trade secret, you need to be able to show the steps you are taking to keep that information private and the advantage it gives your business.

That is where a good confidentiality or nondisclosure agreement comes into place. By signing the agreement, the employee confirms that he or she knows that the information is confidential, and agrees not to disclose it to third parties.

Will a nondisclosure agreement absolutely prevent the loss of your trade secrets? No, nothing will. But it will make it less likely and put you and your business on stronger footing if litigation is necessary to prevent disclosure of your company's lifeblood – its secrets.

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