Lock signifying protecting your secretsWhen you get your year-end Profit & Loss Statement from your accountant, you look at the numbers and values on the sheet, but there are other assets of your business that can be even more valuable than what's listed on the page. As you start and grow your business, your intellectual property is often the most valuable part of your business. Although they are often "intangible," they are very marketable and many of your competitors would love to get access to your business' assets.

If you end up in a lawsuit, protecting these assets can and should quickly become your top priority. When you are being sued by someone outside the business, you want to make sure you are protecting these assets from being disclosed. However, an even more dangerous situation can occur when it's a former owner or employee who is suing your business and they are attempting to access these assets to use in their new business venture. It's a lot easier to start a business when you have a built-in list of customers and clients who you can contact than it is to start a business fresh and find all new people to work with your business.

When you find yourself in a lawsuit, make sure you are discussing your intellectual property with your attorney to be sure that it doesn't get inadvertently disclosed during the lawsuit and then can be used by your competitors to build their businesses. One of the most common types of intellectual property that you need to be sure to protect is what's known as trade secrets.

What Information is a Trade Secret?

Trade secrets are often "proprietary" information that your business would not want to be publicly available. You have usually created this information or grown your customers lists as you started your business. Generally, depending on the nature of your business, trade secrets could be,

  • Customer Lists
  • Formulas
  • Processes for Manufacturing
  • Marketing Strategies
  • Research Data
  • Computer Code or Software

While this is a short list, there can be many other types of trade secrets that you and your business work with on a daily basis. As the name implies, the information should be kept "secret" as much as possible because they represent a competitive advantage for your business. And if you end up in a lawsuit, you need to make sure you are protecting this information.

How Can I Protect Trade Secrets In A Lawsuit?

There is no automatic protection against disclosing trade secrets in a lawsuit, but most courts allow for mechanisms to protect the information after first requiring the party seeking the information to prove that the disclosure of the information is vital to their case. Once that is established, a Court can utilize a Protective Order to govern how information is exchanged. The attorneys prepare a joint document that spells out the procedures for handling confidential information. Then they often submit it to the Judge to be signed. It is a common document in lawsuits, but one that is often underutilized in smaller business disputes in court.

If the parties to the lawsuit are in the same industry, the stakes can be even greater. Especially if the other party can use those trade secrets to their own economic advantage in their business. It’s important to make sure they are not being used improperly. One option for your protective order is to limit who can have access to the information. For example, if you are dealing with customer lists, you could restrict access to only the CEO and General Counsel of the opposing party. They can sign a certification that they won’t disclose any of the information on the list to anyone else in their company. Keeping the customer lists away from the sales team could be a major victory in your lawsuit.

Whether you have just received notice of a lawsuit against you, or you are the one who will be bringing the lawsuit, it’s important to consider the protection of your business’ trade secrets as part of your litigation strategy.

Next Steps

If your business is being sued or is contemplating a lawsuit, and you have confidential information that you want to ensure is protected as part of the process, let's set up a Legal Strategy Session to discuss the process and some courses of action for your litigation strategy.

Andrew Ayers
Connect with me
I work with business and estate planning clients to craft legal solutions to protect their legacies.
Post A Comment