Tech incubators abound these days, especially in and around Silicon Beach. These ‘technology campuses’ allow start ups to collaborate and share ideas, strategies, resources, and knowledge. And sometimes, proprietary information. When discussing their ideas with others, entrepreneurs need to be extremely mindful of the risks to their intellectual property.
For many start ups, trade secrets and/or other intellectual property hold the keys to the business’s future. As such, entrepreneurs – and those who work for them – need to be aware of the various junctures where a start up’s IP could potentially be disclosed. These include raising capital, recruiting employees, beta testing or testing a prototype, and in seemingly innocent conversations between fellow entrepreneurs.
Steps for Protecting IP
How does a California start up protect its IP? Through the strategic use of confidentiality agreements and non-disclosure agreements, which should be signed by employees, independent contractors, vendors, etc… Generally speaking, the more specific the confidentiality terms, the more likely a court is to enforce the provision. This means that start ups need to describe with detailed specificity the categories of information they seek to protect.
Confidentiality agreements should also encompass trade secret information. A trade secret is a secret device or technique used by a company in manufacturing or selling its products which can include source code, research and development tests, business plans, customer, vendor, and supplier information, and other commercially sensitive information which gives the business a competitive advantage.
California start ups should be sure to reference a few California-specific laws when drafting a confidentiality agreement. The first is the state’s version of the UTSA, which offers a few unique features. Under California law, a business is protected against the theft, use, or disclosure of information that can be electronic, paper or memorized by an employee. What’s more, under California’s definition of a “trade secret” it is immaterial that some aspects of the trade secret could be found in publicly available sources.
Of course, technical measures should also be used to protect confidential information and trade secrets in the open environment of a tech incubator. Security measures such as firewalls, passwords, two‐step authentication, and discouraging a BYOD policy for work projects are encouraged.
The strategic implementation of specific legal safeguards can help start ups thrive while protecting the company’s IP. For more information on how to protect your business’s trade secrets or other confidential information, contact experienced trade secret attorney Drew Pomerance today.