You Don’t Have Trade Secrets Under Massachusetts Law Unless You Act to Keep Them Secret

Trade secrets have two origins under Massachusetts law — the court-developed, common law definition, and the legislatively-passed statutory definition. Under common law, a trade secret is a secret that is used in an owner’s business which gives the business an advantage or opportunity for advantage over competitors who do not have the secret. The statutory definition of a trade secret is “anything tangible or intangible or electronically kept or stored, which constitutes, represents, evidences or records a secret scientific, technical, merchandising, production or management information, design, process, procedure, formula, invention or improvement.” When courts have to determine whether something constitutes a “trade secret”, they conduct a fact-based inquiry, looking at factors such as (1) whether the information is known outside the business, (2) the extent to which employees and others involved in the business known the information, (3) measures taken by the employer to protect secrecy of the information, (4) value of the information to business or its competitors, (5) amount of resources expended in developing the information, and (6) ease with which information can be acquired or duplicated by others. Trade secret protection only applies where the secret is “misappropriated” or taken without authorization. It does not prohibit others from independently developing or deriving the information. However, in order to even have the protection of trade secret law, businesses must take reasonable steps to meet the third factor above, measures to protect the secrecy of the information. What is “reasonable” depends on the nature of the information and how the company conducts its business. Measures that companies typically take include requiring employees to sign non-disclosure agreements and agree to confidentiality policies that prohibit activity such as removing files containing trade secrets from the office or transferring electronic files to personal computers and devices. Companies should also take measures to secure documents containing trade secrets — locking up physical files, and password- or firewall-securing electronic files. When a company moves past the “everybody doing everything” phase and employees start working within defined roles, companies should also begin adopting a “need to know” policy for trade secrets, restricting access for those who don’t need to know and (where feasible) monitoring the access of those who do. Most companies run into issues of losing trade secret protection in the courts when they fail to take any measures to protect their secrets. When your company develops information worth keeping secret, it becomes worth it to take measures to protect those secrets.

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