Trade Secrets Are Intangible Assets!

Michael D. Moberly     June 30, 2009

The Ohio Supreme Court ruled that the use of protected trade secret information by a former employee who had memorized it during the course of his employment violated that state’s trade secret law.  Specifically, the Court held that trade secret information does not lose its character as a trade secret (under the U.S. Trade Secret Act) merely because a former employee (a.) memorized it, rather than (b.) writing it down, or (c.) copying it in some ‘tangible’ medium.   (Al Minor & Assoc., Martin Slip Opinion No. 2008-Ohio-292)

Those responsible for designing policies and procedures and executing agreements to sustain the  proprietary status (secrecy) of a company’s information assets, this ruling will surely hasten more collaboration or even convergence of their respective responsibilities, especially in light of the economic fact that today, 65+% of most company’s value, sources of revenue, sustainability, and future wealth creation lie in – are directly linked to intangible assets and intellectual property.

The Ohio Supreme Court’s ruling will also likely serve as an impetus for information asset protection management specialists and intellectual property counsel to review the agreements, policies, procedures, and practices they have exectuted to…

1. Ensure they reflect the adage that ‘all trade secrets start life as ideas’.  In other words, its imperative that the origins of those ideas (trade secrets) are fully unraveled to reveal their status, stability, fragility, and sustainability.  These actions are particularly relevant preludes to any transaction in which intangible assets and/or IP are in play – part of a deal, i.e., mergers, acquisitions, venture capital investments, coprorate-university alliances, etc.  Unraveling assets’ origins (upfront) will mitigate the probability they will, at some point, become ensnared and/or entangled in costly, time consuming, and momentum stifling disputes or challenges.

2. Ensure employee exit interviews fully address the parameters of the Ohio Supreme Courts’ ruling about memorizing and subsequently using trade secrets.  This is especially relevant to employees who have access to and/or utilize a company’s proprietary – competitive advantage information and trade secrets.

3. Elevate the relevance of non-disclosure and non-compete provisions in employment contracts’ insofar as ensuring those provisions are routinely updated relative to employee attrition, promotions and/or lateral movements within a company.

To be sure, the ruling will have significant impact how company’s should go about sustaining control, use, ownership and monitor the value of its proprietary information and trade secrets!

In summary, the Ohio Supreme Court said it is the information that is protected by the USTA, regardless of the manner, mode, or form in which it is stored, i.e., whether its on paper, in a computer, in one’s memory, or, exist in other mediums.


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