Protecting intellectual property presents government contractors with a dilemma (although, as this blog will show, a solvable one). On one hand, when government contractors provide innovative, cutting-edge solutions, they often rely on proprietary methods and technologies unknown by industry competitors. On the other hand, getting more business in the highly competitive federal marketplace tempts government contractors to show their capabilities in public.
A good example of what does not protect a contractor’s proprietary information is a patent. While patents offer the filer strong protection for a period of time, a drawback is that the patent filing is available to the public, potentially allowing a competitor to investigate and improve upon a patented design or method. If a competitor creates a derivative work or otherwise infringes on a patent, not only will the competitor have seen the patent filer’s hand, so to speak, but costly litigation will likely be necessary to rectify the situation and stop the infringement.
A better way to protect proprietary information, especially if its value is primarily derived from the simple fact that it is unknown to industry competitors (think the formula for Coca-Cola), would be to protect that information as a trade secret. Here are the basic rules:
Trade secrets must actually be kept secret.
The whole basis of trade secret protection is that the protected information isn’t generally known to the public and would not be available to an industry competitor except by their use of improper or illegal means. The key here is for contractors to monitor carefully what information they publicize, either on the company website, through promotional or marketing materials, or at trade fairs. On one notable occasion, contractors offering detailed brochures of their capabilities at trade fairs learned the hard way that they lost trade secret protection for the simple reason that the information was no longer a secret!
Identify the information as "Confidential" or "Trade Secret."
Something as simple as a written label, stamp, or sticker will maintain the confidentiality of a trade secret. To be thorough, consider applying the "Confidential" label to the header or footer of each page of confidential documents. Companies may also wish to include trade secret disclaimer language, explicitly stating on the cover of the document that it contains confidential information owned by the company and that the theft of such information may constitute a crime under both state and federal law. Government bidders can use the restrictive legend found in FAR 52.215-1(e) to protect the proprietary information in their proposals.
Vigilantly safeguard trade secrets.
Even if a folder is stamped "Confidential," leaving it unattended in a conference room or on someone’s desk at the end of the day may show that the company did not make a sufficient effort to maintain that document’s secrecy. Keeping physical documents in a locked filing cabinet and password-protecting or encrypting electronic files is a proven way to restrict access to that information. When confidential information is to be discarded, it should be shredded rather than simply thrown away. Even if a competitor isn’t likely to get its hands on another company’s garbage, having a company policy of shredding sensitive documents demonstrates a need to keep that information a secret.
Use confidentiality agreements.
If a contractor wants to give trade secret access to someone from outside the company for any purpose, it should make the recipient sign a confidentiality agreement. In fact, why limit it to outsiders? It’s smart to have all employees, independent contractors, teaming partners, and consultants sign confidentiality agreements if they are likely to require access to confidential information. While restricting physical access to confidential documents is easy, it takes a little extra effort to take the additional (but important!) steps of using nondisclosure and confidentiality agreements.
As you can see, trade secret protection offers a compelling alternative to other ways of safeguarding intellectual property; it’s inexpensive, requires no filing fees or applications, and requires no public disclosure of proprietary information—quite the opposite, in fact! The simple steps of identifying confidential information, requiring the use of nondisclosure agreements, and carefully monitoring the information shared with the public give government contractors an easy way to protect their most valuable company secrets.