Marketing testing procedures and results often provides compelling data to influence customer decisions. But, doing so may impede potential trade secret misappropriation claims.
As further described below, a federal court recently granted summary judgment against a trade secret misappropriation claim because the company advertised information about testing equipment, operations, and outcomes. (S&G Labs Hawaii v. Graves).
Trade secret protections can shield against competitors stealing knowhow that makes companies unique. If not properly policed, a company could inadvertently disclose confidential information and limit possible remedies.
Given the importance of advertising, S&G Labs cautions companies to balance marketing strategies with giving competitors access to key proprietary information.
Trade secrets and their application to advertising
Trade secrets protect company knowhow. Broadly defined in the Uniform Trade Secrets Act (“UTSA”), which most states and the federal government have adopted a version of, a trade secret is any information that:
- Derives economic value from not being generally known; and
- Is subject to reasonable efforts to maintain secrecy.
“Information” includes almost anything, but namely formulas, programs, compilations, devices, methods, techniques, and processes. This definition covers business, technical, and financial information.
Companies commonly risk losing trade secret protection through advertisements. In attempting to reach customers, effective marketing strategies could disclose otherwise protected information.
Trade secret misappropriation, product testing, and marketing
In S&G Labs, the company filed trade secret misappropriation claims related to medical laboratory testing, specifically testing equipment and speed.
Although the court recognized this information may otherwise be protected, the court granted summary judgment. (See also 18 U.S.C. § 1836 (federal trade secret definition); Haw. Rev. Stat. § 482B-2 (Hawaii trade secret definition)).
Because the company admitted it used this information in advertisements to potential customers and included photos on its website, it failed to maintain secrecy. As a result, the company lost its competitive edge.
Notably, the court denied summary judgment as related to testing volume because the record did not show the company provided this information to customers. If the company had balanced marketing with protecting information, it could have prevented competitors from benefiting from the company’s trade secrets.
Takeaways: what S&G Labs means for advertising and trade secrets
S&G Labs can serve as a reminder of important considerations regarding marketing while still protecting trade secrets:
- Sharing photos of and information regarding testing equipment and results may be beneficial from a marketing perspective, but putting that information on public platforms like websites and social media accounts could allow competitors to use it without recourse.
- To prevent competitors from using similar testing procedures, be careful about how much information is shared with customers. Sharing information can remove trade secret protections by suggesting you did not take reasonable steps to maintain the information’s secrecy.
- Because trade secret protection is lost when the information becomes public, be judicious with what you share to the public. Remember to take your business’s specific needs and concerns into consideration when deciding what and how much to share.
When deciding what to share, ask: is it more important to release information to attract more customers or to keep that information private to prevent competitor access?
Think critically regarding this balance between creating effective marketing and protecting trade secrets before sharing any potentially protected information.
Cassandra Gizzo assisted with the drafting of this post.
