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Trade Secrets: Contracts

    Trade secret protection is often extended through the law of private agreements (i.e. through contract doctrine). These agreements take many forms including employment contracts with non-compete clauses, non-disclosure agreements and licensing agreements. In short, when drafted correctly these agreements provide protection over and beyond the protection provided by meeting trade secret requirements. These agreements may indeed provide specific relief despite the fact that a trade secret is now in the public domain. The rationale that underpins the controlling legal theory is predicated upon the freedom to contract. Trade secret protection via contract doctrine is yet another example of how contracts dominate the world of business, whether online or off. Contract doctrine is so ubiquitous that it often goes unnoticed, until of course the lack of an effective agreement denies a business owner relief that they otherwise would have been entitled to.

    Want to protect against the adverse effects of key employees leaving and taking your trade secrets with them to the competition? Sure, you may have met all the trade secret requirements but the mere fact that trade secrets could be revealed will not, in and of itself, prevent a court from upholding the right of an employee to work for a direct competitor. Of course, if there is evidence (post "defection") that trade secrets have been revealed, then you have a cause of action; but by then most of the damage has been done. What you need in order to provide additional protection is an enforceable non-compete clause that was included in the employment contract signed by the employee as a condition of employment. This clause must be reasonable in "time, scope and geography" otherwise a court will consider the clause to be an unfair restraint of trade (i.e. preventing the employee from earning a living). But remember, what is "reasonable" for an online business may differ significantly from what may be considered reasonable in the "world of atoms." Your direct competitors may in fact be in an entirely different jurisdictions and therefore the concept of "geography" must of necessity be more expansive, yet still meet the reasonableness test of the local jurisdiction.

    Similarly, with more and more knowledge work being outsourced, an online entrepreneur has a need to protect secrets that may be shared with any number of third party service providers. In this instance, an enforceable non-disclosure agreement is in order. In short, there are numerous permutations to the scenarios described here wherein the law of private agreements provides protection. What is required is that a business have a well drafted set of standard instruments to be used when the need arises. The use of such instruments is usually standard operating procedure for most businesses, but an alarming number of small to medium size businesses simply fail to take the necessary precautions.

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