Intangible assets make up 75 percent or more of the value of publicly traded companies.  That number increases for small businesses, many of which have few assets other than their ideas, strategies, and relationships. 

If you want your business to succeed, you must take deliberate steps to protect and secure your intangible assets.  Your plan should rely on at least three different tools: non-compete agreeements, trade secrets, and confidentiality agreements.  Failure to do properly plan may be fatal to your business.

Trade secrets offer businesses a viable method for protecting their confidential information.  Your trade secret protection can last forever, provided that you take proper steps to maintain the secrecy of your information.

Like most states, Arizona has adopted the Uniform Trade Secrets Act to help businesses protect their intangible assets.  The Act extends trade secret protection to virtually any type of business information, as long as you can show each of the following:

• The information is not generally known or readily ascertainable by people in your industry;
• The information has "independent economic value" because it is not generally known; and
• You have taken reasonable efforts to keep the information secret.

Any program to protect your trade secrets must begin with an audit of your confidential business information.  Do you use confidential formulas, patterns, or devices?  Are your business methods or processes uncommon  in your industry?  Have you developed customer lists or other confidential information that your competitors would like to have?

While no business will have every type of confidential information, every business has some type of confidential information that can be protected as a trade secret. 

Next, determine how your company derives independent economic value from the fact that your information is confidential.  Does your trade secret reduce manufacturing costs?  Do you generate additional sales because of your trade secret?  Is your product successful because it uses a proprietary formula or process?

The key to maintaining your trade secret is to take appropriate steps to keep the information confidential.  The law does not require absolute secrecy, but you must take "efforts that are reasonable under the circumstances" to keep the information secret.  What is required varies from company to company.  It also may change as your company grows.

While the "efforts that are reasonable under the circumstances" will vary, most companies should include at least the following efforts:

• Mark documents as "Confidential"
• Remove Confidential documents from general view
• Restrict access to Confidential information on a need to know basis
• Segregate confidential information on your network or hard-drive
• Dispose of Confidential documents in a secure manner
• Consider the need for and use of physical barriers to confidential information
• Develop and enforce a company policy on disclosure of confidential information
• Enter into confidentiality agreements with employees handling confidential information
• Review your program at least once a year to ensure that it still meets your needs

No matter what stage your company is in, start your program now.  If you fail to act promptly, you may lose your most valuable company assets to neglect or inaction.  Protect your trade secrets, and your business will boom.


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Who is Scott F. Gibson?  For 23 years, I have practiced business law in Arizona, the past ten as the managing partner of Gibson Ferrin & Riggs, PLC.  We help businesses and their owners meet their business and personal goals.  My practice focuses on the intersection between intellectual property law and employment law.  I help businesses prosper by properly managing their intangible assets. 

You can learn more about me on Martindale Hubbell, Avvo, or gfrlegal.com.  Follow me on Twitter or LinkedIn.