Practice Areas

Trade Secrets, Confidentiality, and Covenants Not To Compete

What is a trade secret?

A trade secret is any piece of business information with economic value that has been kept confidential.

Trade secrets can include information, formulas, codes, methods, practices, and many other aspects of your business. This information is valuable and often essential to your competitive ability. Arkansas has a multi-factor test to establish whether the information is a true secret worthy of protection by a court. The third factor is critical:

  1. The extent to which the information is known outside the business;
  2. The extent to which the information is known by employees and others involved in the business;
  3. The extent of measures taken by the company to guard the secrecy of the information;
  4. The value of the information to the company and its competitors;
  5. The amount of effort or money expended by the appellee in developing the information and
  6. The ease or difficulty with which the information could be properly acquired or duplicated by others.

There is no certificate or registration number assigned to a trade secret. The protection requires that a judge establish it. Many employers require employees to sign Confidentiality Agreements.

Why protect your trade secrets?

While it is common for businesses to invest substantial time and expense into making their products or services even more competitive in the marketplace, many of those same businesses fail to recognize the risk in a former employee disclosing the results of your hard work—your secrets—to their next employer.

The same risks must be addressed when your company collaborates with other companies or outsources elements of your business that incorporate your trade secrets.

Confidentiality agreements

A confidentiality agreement is an essential piece of the strategy for protecting trade secrets. Absent a confidentiality agreement, many business trade secrets are at greater risk of being stolen or misappropriated. Tyson Foods, Inc. v. ConAgra, Inc., 79 S.W.3d 326 (Ark. 2002). In that case, the Arkansas Supreme Court found that post-employment confidentiality agreements or covenants not to compete would weigh heavily in the inquiry as to whether the nutritional content information of chicken feed was a company trade secret. The Court found that confidentiality agreements or covenants not to compete would have been “active efforts on the part of Tyson to protect proprietary information it considered to be a trade secret.”

Noncompete agreements

Noncompete agreements have become commonplace in today’s workplace, and we receive many calls from clients who have signed noncompete agreements without reading the fine print. Please always consult an attorney before signing a non-compete agreement. These agreements have been a significant source of litigation, especially when an employee leaves one company and begins work for a direct competitor. Arkansas and many other states generally look unfavorably on contracts that restrict a person’s future ability to earn an income.

However, even with this skeptical view, the Arkansas legislature recently changed how courts review noncompete agreements. Prior to 2015, a court finding a noncompete agreement overly broad would void the entire contract that included it. Borden v. Smith, 478 S.W.2d 744, 747 (Ark. 1972). Under the new law enacted in 2015, the same court would merely rewrite the agreement to become enforceable, keeping it valid. Ark. Code Ann. § 4-75-101(f).

This “blue pencil doctrine” represents a significant departure from past precedent and serves as a real win for employers and a heavy obligation on the employee. It encourages employers to write comprehensive, unenforceable noncompete agreements, knowing that if the employee decides to challenge the deal in court, the employer will still get the maximum restriction the reviewing court will permit. Because the court will enforce the most severe version of a noncompete permissible, you must have any noncompete agreement reviewed by counsel before signing it.

Protecting your trade secrets requires a holistic approach

However, confidentiality agreements and covenants not to compete are not the only options available for a company to establish that information is a trade secret and that efforts were made to protect it. “Those measures include detailed record-keeping procedures, physical security, confidentiality agreements, vendor and supplier confidentiality agreements, use of confidential stamps and legends, computer security measures like passwords, and entrance and exit interviews.” Tyson Foods, Inc. v. ConAgra, Inc., 79 S.W.3d 326, 332 (Ark. 2002).

Our attorneys can help you implement a system that is designed to:

  1. Identify trade secrets;
  2. Establish policies and best practices for your employees and
  3. Enforce those agreements to prevent the unauthorized sharing of your valuable trade secret assets with the public or your competitors.

Protecting your trade secrets

Keep it secret
A trade secret is valuable only so long as you can keep the information out of the public’s eye. Businesses need to have a comprehensive system of confidentiality agreements signed by employees and consultants to ensure the secret being developed is not leaked to a competitor.

Of course, if you’re showing the product to the public at a trade show and freely discussing your ideas with others, then you’re no longer able to claim what you shared is a trade secret.

The value in a trade secret is literally that no one else knows it. The quintessential example is the formula for Coca Cola.

Mark it confidential
Many cases depend on whether the owner of the trade secret took the time to stamp confidential documents as “confidential” or otherwise designate the importance of the information within a company. Every fact pattern is different, but Henry Law can help you ensure that your company culture and practices maximize the protection of your trade secrets.
Enforce your rights
Henry Law has represented clients in all facets of cases involving theft of trade secrets. Sometimes the allegations involve former employees, while other claims involve actual theft of information by a competitor. Regardless of how your trade secrets are misappropriated, we have the knowledge and experience to seek all of the remedies available to you.

Contact Us Today

With a proven track record of achieving excellent results in complex cases, Henry Law Firm is ready to go to work for you.

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HENRY LAW FIRM

Otto M. Bartsch

With degrees in philosophy and chemistry, Otto excels in complex litigation and intellectual property cases.

In a recent federal case, Otto used forensic digital analysis of crucial documents to reveal their fraudulent nature, immediately resolving all claims in our client’s favor. Otto led a multi-jurisdictional collection effort of a $3.4 million judgment for Oklahoma Genetics, Inc. The case was on claims of intentional violation of the Plant Variety Protection Act, and a federal judge tripled our client’s damages. Years after the judgment was entered, Henry Law Firm forcibly seized substantial assets, and OGI could re-invest proceeds into future seed varieties and genetics.

Before affiliating with Henry Law Firm and practicing law as Otto M. Bartsch, PLLC, Otto earned his Master of Laws in Intellectual Property & Technology Law. At graduation, Otto ranked highest in his LL.M. class. He also won the Client Counseling Competition and competed in the national semi-finals of the AILPA Giles Rich Moot Court Competition in intellectual property law.

Otto works with clients to establish and protect their trademarks, copyrights, and brand identities. He is also experienced in breaking or enforcing non-competition agreements.

COURT ADMISSIONS

Otto is licensed to practice in Arkansas, Missouri, and Texas and has been admitted to practice in several federal courts, including the Eastern and Western Districts of Arkansas, the Eastern and Western Districts of Missouri, and the United States Court of Appeals for the Eighth Circuit.

HENRY LAW FIRM

Mark Henry

Mark is AV-Preeminent™ rated, a distinction earned through years of consistently outstanding legal work and a reputation for integrity. With decades of experience as a registered patent attorney and an LL.M. in agricultural law, he has developed a deep focus on protecting agricultural seed technology. Mark works closely with universities and multinational companies to navigate complex intellectual property matters and ensure long-term protection of innovation. He has handled more than 100 cases under the Plant Variety Protection Act, bringing a wealth of practical insight to the defense of plant breeders' rights. In addition to his legal practice, Mark has contributed to the field as an educator, teaching agricultural biotechnology law in the LL.M. program at the University of Arkansas School of Law.

Mark prosecutes and defends highly complex civil litigation and high-stakes, bet-the-company disputes involving trade secrets, patents, copyrights, and DMCA claims in federal courts across the country. His cases frequently address cutting-edge issues involving computer code, seed genetics, and architectural works. Licensed in six states and admitted to practice before the United States Patent and Trademark Office, he has served as lead counsel for clients in more than twenty-five states, offering broad strategic perspective and experience.

Mark brought one of the first cases under the Frank Broyles Publicity Rights Act, Ark. Code Ann. § 4-75-1101, helping to shape the early application of Arkansas’s right of publicity law. He successfully represented professional rodeo athlete Cody James in a case involving the unauthorized commercial use of James’s name and likeness. A decorated competitor, Cody has qualified for the Arkansas Rodeo Association Championships 22 times, is a seven-time ARA Champion, and has been named both Overall Rookie of the Year and Tie-down Roping Rookie of the Year by the Professional Rodeo Cowboy Association. Mark’s advocacy in Cody James v. Boot Barn, Inc., No. 4:22-cv-646-KGB (E.D. Ark. 2023), helped affirm the importance of protecting the identity and brand of professional athletes under Arkansas law.

He also serves as both trial and appellate counsel, offering a comprehensive approach to complex litigation. In Associated Electric Cooperative, Inc. v. Southwest Power Pool, Inc., Case No. 23-1293, (8th Cir. 2024), Mark secured a significant trial and appellate victory, successfully defending a $37.64 million claim in an energy dispute involving tariffed energy rates. The Eighth Circuit agreed that SPP had fully compensated AECI for the transactions in question and held that equitable recovery theories are not available when an express contract governs the parties’ relationship.

Mark is also known for taking a principled stand against improper litigation conduct. In Lyon v. The Academy, Inc., 2024 Ark. App. 386, he obtained Rule 11 sanctions against opposing Arkansas counsel Matthew Campbell and Elizabeth Lyon. The Arkansas Court of Appeals affirmed the sanctions, finding that their claims were frivolous, had no chance of success, and were brought solely to harass and drive up litigation costs—highlighting Mark’s commitment to professionalism and the integrity of the legal process.

When disputes arise with Walmart, Mark provides trusted counsel to both large and small vendors. Given that Walmart is headquartered in Northwest Arkansas and most of its contracts require disputes to be litigated in Benton County, Mark’s location in Fayetteville—home to the federal court for Northwest Arkansas—positions him ideally to handle these matters efficiently and effectively.

Mark is admitted to practice before the U.S. Supreme Court, the U.S. Courts of Appeals for the Eighth and Federal Circuits, and several federal district courts, including the Eastern and Western Districts of Arkansas, the District of Nebraska, and the Eastern and Western Districts of Oklahoma. He also represents clients before the Trademark Trial and Appeal Board in trademark matters.

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