Illinois Trade Secrets Law

Both Illinois and Federal law prevent the unauthorized use of trade secrets. The information presented in this File Memorandum is not a substitute for a binding non-disclosure/non-competition agreement, but rather, should be used as a supplemental protection of valuable information.

A “trade secret” is:

(a)      information;
(b)      kept from general disclosure;
(c)      that derives value as the result of its being kept from disclosure.

In determining whether information is a trade secret the law considers:

(1)      extent to which info is known outside the business;
(2)      extent info is known by employees and contractors;
(3)      precautions taken to protect secrecy of the information;
(4)      value or savings realized by keeping the information secret;
(5)      effort or money expended to obtain and develop the info; and
(6)      time and expense for others to acquire and duplicate the info.

Any kind of information can become a trade secret as long as that information complies with the above-referenced factors. However, in most businesses the following categories of information are most readily considered trade secrets:

Financial Information

(a)      sales forecasts and quotas;
(b)      employee compensation systems;
(c)      banking and investment records;
(d)      investment strategies;
(e)      internal bookkeeping records;
(f)      internal income and expense statements;
(g)      internal profit and loss statements;
(h)      internal balance sheets;
(i)      internal cash flow analysis; and
(j)      internal cash management procedures.

General Information

(a)      customer information such as
names
addresses
company affiliations
purchase records
purchase inquiries

(b)      vendor and supplier information such as
names
addresses
company affiliations
purchase records and inquiries

(c)      information regarding strategic alliances and cooperation such as
names
addresses
company affiliations

(d)      technical and project information such as
drawings
blueprints
plans
models
maintenance instructions and frequency
materials lists

(e)      marketing information such as
product pricing methods
profit margins
demographic analysis
competitive analysis
market survey results

No single set of policies can guaranty protection of sensitive information. However, the following policies should be put into place as completely as possible in order to gain the maximum protection from unauthorized use.

Hiring Practices
(a)      inform new employees they will be exposed to confidential info;
(b)      explain the concept of a trade secret;
(c)      explain that the business would suffer irreparable harm if the trade secrets were disclosed, whether intentionally or not;
(d)      explain that disclosure is grounds for immediate termination;
(e)      explain that all new employees must sign non-disclosure and non-compete agreements;
(f)      determine whether the employee has previously worked for a competitor;
(g)      determine whether the employee has previously signed a non-compete or non-disclosure with another employer (contact that employer if necessary to prevent unintentional use of trade secrets from another company or a conflict with a prior agreement signed by the employee); and
(h)      only allow employees access to job-specific, necessary info.

Termination Policy

(a)      conduct exit interviews to confirm what they know;
(b)      require employees to return all materials; and
(c)      require employees to sign a form acknowledging their continuing duties of non-disclosure and non-competition and stating that they have returned all materials belonging to the business.

To be considered a valid trade secret, information must be treated as a valuable resource including the following typical steps:

(a)      restrict access to principals of the business;
(b)      restrict access by employee function and need;
(c)      place documents in locked safe, vault or safety deposit box;
(d)      limit copies of confidential documents and track those copies;
(e)      control amount of time someone can view and use a document;
(f)      prohibit reproduction of confidential documents;
(g)      prohibit removal of confidential documents from on-site; and
(h)      inspect persons leaving the business premises.

Non-Disclosure Agreements should at least contain the following:

(a)      identifying information about all parties to the agreement;
(b)      recitation of the purpose of the agreement;
(c)      mention that agreement covers valuable trade secrets;
(d)      recitation of consideration;
(e)      recipient’s agreement to keep the information confidential;
(f)      remedies for recipient’s breach of confidentiality;
(g)      recipient’s duty to notify if they become aware of a breach;
(h)      a period after termination during which confidentiality still binding;
(i)      signatures of all parties; and
(j)      date of the agreement.

Non-Compete Agreements should at least contain the following:

(a)      identifying information about all parties to the agreement;
(b)      recitation of the purpose of the agreement;
(c)      statement that the business has a legally protectible interest;
(d)      recitation of consideration;
(e)      a period after termination during which non-compete still binding;
(f)      reasonable geographic area in which non-compete is binding –BUT cannot prevent recipient from making a living or stifle competition;
(g)      remedies for recipient’s breach;
(h)      recipient’s duty to notify in case of breach;
(i)      signatures of all parties; and
(j)      date of the agreement.

Resources for Further Investigation

Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq.

Trade Secrets Database http://www.asksam.com/halligan/

IP Law in Illinois, http://library.findlaw.com/2000/Jul/1/126728.html