Protecting Trade Secrets – Part 1

A potential client called me for help in starting up a company to develop, produce, market and finance a manufacturing idea — a confidential, proprietary “trade secret” — he had conceived and refined after many months of hard work.

But what we wound up talking mostly about that day was his fear that when he disclosed his idea to potential capital partners to attract their interest, they would politely pass on financing him but would steal the idea for their own benefit. And he was sure that those big companies could outspend and outlast him in any lawsuit he could bring against them for stealing his idea.

This was my advice to him.

First, you do your homework to identify sound, creditable and trustworthy (insofar as you can determine) potential capital sources who have demonstrated an interest in funding the kind of idea or invention you are offering (how to do that, is not the topic of this blog; but many inventors and entrepreneurs could avoid a great deal of remorse if they took this step seriously).

Second, you only show them your idea, gadget, invention, algorithm or invention AFTER you get their signature to a good, strong confidentiality and nondisclosure agreement. (I wrote about NDAs back in 2012.) Whether or not they have any interest in pursuing the idea with you, they will be contractually bound not to use it or disclose it to any other person.

But, he said, companies break contracts all the time; how can a piece of paper stop them?

Third, I explained that, if he had taken the first step listed above, he would likely be dealing with a reputable counterparty, someone who would value his own good reputation (and his opinion of himself above the sleazy chance to pocket some money by stealing another man’s idea. There is a strong moral power in a good confidentiality and nondisclosure agreement.

But — fourth — he should not rely upon moral rectitude alone to keep the counterparty honest. He should rely upon the law and a well-written NDA.

This man wasn’t aware of two key factors. The law provides several civil and criminal inducements to encourage persons on the receiving end of intellectual property to not misappropriate that property. And trial court attorneys are happy to represent you on a contingency basis — so they, not you, are really funding the lawsuit — if you bring them a well built, winning set of facts.

In Part 2 of this blog, I will write about the Texas statutes every inventor, designer, programmer, entrepreneur, intellectual property owner and businessman in the state ought to be familiar with, when it comes to protecting their trade secrets and other valuable information.

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