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The Price of Trade Secrets

The term "trade secret" conjures up images of Kentucky Fried Chicken's 11 herbs and spices that make up its secret recipe. Or Coca Cola's recipe that is known to only two or three persons in the world. However, these are only examples of a trade secret. There are many other (more mundane, but nonetheless important) trade secrets that are worthy of protection.

If you are a business owner, or work for a business, large or small, odds are good that you deal with trade secrets. Pricing information may be one such secret. Lots of folks may think that pricing information is not a secret, every customer gets an invoice, right? That's not always the case.

If you are involved in competitive bidding, then you know how important pricing data is. If a competitor knows what your bid is on a job, he can undercut you by the thinnest of margins, and snatch up every job because your competitor knows what you'll bid before you do.

That is why it is so essential to guard any formula used to price your goods or services, and only share this trade secret with top level management.

Additionally, you might ask yourself, what is stopping top management from jumping ship and becoming that competitor? How do you keep your trade secrets from walking out the door with that key employee?

It may be wise to get anyone privy to this secret information to acknowledge that it is, in fact, confidential. But, talk is cheap. It's not enough that you want to keep a trade secret, you need to be able to show the steps you are taking to keep that information private and the advantage it gives your business.

That is where a good confidentiality or nondisclosure agreement comes into place. By signing the agreement, the employee confirms that he or she knows that the information is confidential, and agrees not to disclose it to third parties.

Will a nondisclosure agreement absolutely prevent the loss of your trade secrets? No, nothing will. But it will make it less likely and put you and your business on stronger footing if litigation is necessary to prevent disclosure of your company's lifeblood – its secrets.

Collin J. Wynne
The Vethan Law Firm PC

Should You Include An Arbitration Provision in Your Employee Agreement

Arbitration is a valid alternative to litigation and is found in many of our routine agreements. For instance, your agreement with your credit card company, your cable company and your stock broker all probably contain provisions that require you to arbitrate any disputes arising from those agreements. But do your agreements with your employees contain arbitration provisions? Are such provisions of value to you and your business?

Arbitration is a creature of contract and most arbitration agreements arise as a result of a contract between two or more parties. In times past, most arbitration agreements were in the context of commercial transactions, but their use has greatly expanded. There is a very strong public policy in favor of arbitration (instead of litigation) and such agreements have become much easier to enforce over the last 20 years.

A recent case from the Texas Supreme Court confirms that an employer and its employee may enter into a valid agreement to arbitrate all disputes, even when the employment is "at will." In re 24R, Inc., 2010 Tex. LEXIS 794 (Tex. 2010). http://www.supreme.courts.state.tx.us/historical/2010/oct/091025.pdf In that case, Plaintiff, Frances Cabrera had worked for 24R, Inc., d/b/a "The Boot Jack," as an "at will" employee and had signed a series of three arbitration agreements during the 15 years she worked for The Boot Jack. After being terminated, Cabrera filed an unsuccessful discrimination claim with the Texas Workforce Commission, and after that claim was dismissed, a lawsuit against The Boot Jack. The trial court overruled The Boot Jack's motion to compel arbitration and a petition for writ of mandamus was filed with the Texas Supreme Court, which overruled the trial court's decision.

But how does this affect your business and its bottom line?

Arbitration is often preferable in employer/employee disputes because the process is confidential, expensive written discovery may be limited, and an arbitrator is less likely to be swayed by emotional arguments than a jury. Therefore, your company's "dirty laundry" is not aired to the world and you are not at the whim of a jury of 12 people to determine the resolution of your dispute.

Furthermore, the decision of an arbitrator (panel of arbitrators) is generally not subject to appeal, and is therefore final. From a business standpoint, arbitrating a dispute with a former employee just may make more sense than filing a lawsuit and taking the case to trial.

Lee Keller King

The Vethan Law Firm, PC