Protecting One's Secret Sauce: Trade Secret Violations
What happens when the big companies aim to copy that “secret sauce” and squeeze out the small producers?
Small candy producers compete with the candy giants because they have something the giants don’t have – a product or taste that is inimitable. But what happens when the big companies aim to copy that “secret sauce” and squeeze out the small producers? Can a small candy business defend itself against these giants?
Trade secret violations are becoming increasingly common, and as more and more of the candy manufacturing is outsourced to third parties, it’s important that small businesses know how to protect themselves to prevent a trade secret misappropriation in the first place, and know how to fight back when a violation occurs.
Small firms are often reluctant to take on the big companies, which, as result, can eventually lead to them being forced out of business. Don’t run away from this problem. Small businesses can win against the big guys – if that small business protects itself and is prepared with skilled counsel ready, if necessary.
For example, Pine Valley Inc., a small, Los Angeles-based frozen food producer recently won a multi-million dollar award from the United States subsidiaries of a Japanese food manufacturing giant, based on trade secrets misappropriation and wrongful interference with business, in Pine Valley v. Ajinomoto.
Pine Valley won because they had put some measures in place to protect themselves from the beginning, documented their ownership of the trade secrets and they didn’t back down when it came to defending themselves in court.
Some tips to follow to protect and defend yourself:
1.Vet your manufacturers. Do some careful research on any manufacturer you intend to work with. Look at their past work history and, if possible, ask for references. See if they have been sued before.
2.Protect your trade secrets and recipes. Before giving your confidential recipes or other proprietary information to anyone, prepare an appropriate Confidentiality and Non-Disclosure Agreement that protects you.
3.Monitor the party to whom you gave your recipes and other trade secret information. Undertake ongoing due diligence to verify that the party to whom you gave your trade secret information to is not using it without your permission.
4.Keep your trade secret information confidential. The law recognizes certain actions that should be generally taken to protect your trade secret information and to maintain its status as a protected trade secret. Adhere to those actions rigidly.
5.Protect your customer relationships. Do not let anyone interfere with, or usurp, your customer relationships. Protect those relationships and do not allow a supplier to assume your side of the relationship under any circumstances. Maintain and control the lines of communication between your customers and your suppliers.