Nondisclosure agreements offer critical protection for a business’ intangible assets, including its trade secrets and confidential information. Many workers are bound by these agreements and many business owners rely on them to try to keep their “secret sauce” safe from competitors.

But in truth, many businesses are a little too much in “love” with the idea that their business information can be protected. When push comes to shove, many business owners find themselves spurned by the fact that they can’t use an NDA to protect all information in their business.

Information used in a business can be broken down into three general categories. A company’s trade secrets consist of the information that is not commonly known in the industry and that has economic value from not being commonly known. The recipe for Colonel Sanders’ 11 herbs and spices is an example of a trade secret. As long as the owner takes reasonable steps to maintain the secrecy of the information, the law protects a business’ trade secrets without more.

A business also relies on confidential information – information that shares some of the characteristics of but which does not rise to the level of a trade secret. A customer list may constitute confidential information in appropriate circumstances. An employer may protect its confidential information through a written agreement with its employees.

Finally, a business operates on general skills and knowledge, which consists of the skills and information that a competent practitioner knows and uses in engaging in the trade. The employer cannot prohibit an employee from using these skills and knowledge after she stops working for the company. The information and skills belong to the employee even if she had no knowledge of the industry when she joined the employer.

Because general skills and knowledge constitute the bulk of the information used in the business, a business cannot prevent a former employee from using that information to compete against the company. But with proper planning and implementation, the employer may protect its trade secrets and confidential information – the company’s most important crown jewels.

Have you taken proper steps to protect your business from unfair competition by disloyal employees? Contact Scott Gibson at 480-344-0965 to learn how to protect your confidential information and trade secrets.