Colorado Trade Secrets Owners May Use Non-Compete Agreements to Protect Trade Secrets in conjunction with the Colorado Uniform Trade Secrets Act to prevent employees from misappropriating trade secrets.
Colorado has enacted two statutes which can be read together to enable an employer to protect its trade secrets. Colorado has a very strong policy favoring the right of individuals to be employed and does not favor any agreement which tends to restrict that right to employment. An important exception to that rule is the employer’s right to protect trade secrets with a non-compete agreement. A carefully written non-compete which is directed to the protection of trade secrets is enforceable in Colorado. The agreement must be very carefully written to exclude any other interpretation of its meaning and intent. That immediately raises the question of what is a trade secret.
Colorado’s version of the Uniform Trade Secrets Act which has a lengthy definition of trade secret which can be simply summarized to define a trade secret as any information which has business value which is not generally known or used and which the employer has taken steps to protect. What this means in practice is that a wide variety of information from customer lists, to sales methods to chemical formulas to cooking methods, to financial data, may, if kept secret and not otherwise generally known are protectable as trade secrets.
The business owner who possesses trade secrets and a written non-compete which addresses trade secrets gets two causes of action to protect the trade secrets. One cause is to enforce the non-compete and the other is to protect the trade secret under the Uniform Act. If the ex-employee is employed by one who knows or should know the trade secret rights of the first employer, the second employer may be enjoined or made to respond in damages for injury to the trade secret rights of the owner.
The maintenance of trade secret rights requires internal business procedures and the use of non-disclosure agreements with those who have access to the trade secrets. The governing concepts are that the information must be secret and must be “of value”.
When these conditions are met, the employer has a powerful lever and shield to protect the confidential aspects of how it does business.
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