Failure to Protect the Intangible Assets of the Business.
Patents, trademarks, copyrights, and trade secrets are critical to the success of virtually every modern business. How you take care of those intangible assets will determine whether your business succeeds.
Margaret developed a formula for an environmentally friendly cleaning agent. Though the product was made from commonly available chemicals, Margaret had discovered that if she heated the chemicals to a precise temperature, they combined in a way that was unknown to others in her industry. Margaret’s formula was safer than anything her competitors made, so safe that the salesmen would take a drink of the formula during their sales pitch to show how harmless it was. All of her competitors recommended wearing gloves when using their cleaning agents.
Martin joined the company in an entry-level position, but showed a great aptitude for the business. Margaret gave Martin positions requiring increasingly more responsibility. He eventually became the head of production.
Margaret was disappointed when Martin left after eight years of service, but wished him well. Shortly afterwards, her sales representatives told her that Martin had formed a competing business that offered a product he claimed was “just as safe” as Margaret’s product. He even drank some of the product in his sales meetings, just like Margaret’s salesmen did.
Martin sold his product for 20 percent less than Margaret sold hers. Customers told the salesmen that while they liked Margaret’s product, Martin’s was just as safe and effective – and it cost less.
Margaret’s investigation revealed that Martin’s formula was made at the precise temperature that she used in her process. To make matters worse, other competitors somehow learned how Martin made his formula, and three different companies began selling a product that was “just as safe” as Margaret’s product. Margaret’s sales plunged.
How to Avoid Mistake #10
Did you know that 75 percent of the value of publicly traded companies comes from intangible assets? The percentage is even greater for many small businesses, which often have few assets other than their intellectual property and goodwill. More than 90 percent of all new technology is protected as a trade secret, making trade secrets the crown jewels of corporations. If it is unknown to others in the industry, almost any type of information may meet the legal definition for a trade secret. Your trade secrets may be your company’s most important and valuable assets.
Once a trade secret becomes publicly known, it no longer is a trade secret. If you want to protect your most valuable assets, you must act today. Develop a plan to assess, inventory, and protect your trade secrets. Regularly audit your practices and procedures to make sure that they adequately protect your trade secrets. Teach all employees the importance of your trade secrets, and enact policies that guard your assets. Require employees to sign appropriate trade secret agreements as a condition of their employment.
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Knowing the Ten Fatal Mistakes is not enough. Successful businesses take affirmative steps to avoid and overcome the Mistakes. Will you choose to heed the warnings?
If any of the ten illustrations remind you of your own business, take action today to make sure you won’t succumb to the Ten Fatal Mistakes. Contact your lawyer today. Develop and implement a plan for addressing the Ten Fatal Mistakes. Follow that plan through conclusion.
Running a successful business is hard work in any economic environment. Avoid the Ten Fatal Mistakes, and help your business succeed.
If you have further business related questions, please call our office at 480-733-6800 and ask to speak with Scott Gibson. Scott, an AV rated attorney, handles employment law, trade secrets and restrictive covenants, commercial litigation and intellectual property. He brings with him 27 years of experience and a unique combination of compassion, patience, intelligence, listening ability and commitment.