Predicting success in today’s economic climate can be challenging for any business—and measuring risk can be even more difficult. This is especially true for small businesses owners in Northwest Arkansas as they struggle to preserve their assets and try to stay one-step ahead of the competition. At Keith, Miller, Butler, Schneider & Pawlik, PLLC, we understand that managing risk is an important step to helping your small business succeed

One of the greatest risks faced by businesses of any size is the risk of losing its competitive edge in the marketplace. The edge can be lost in any number of ways, but one of the most personal and costly losses a business can sustain is the misappropriation or wrongful disclosure of its confidential business information. This often occurs in the employment setting when an employee uses trade secrets, client lists, confidential business plans, or other forms of valuable commercial information for his or her own benefit or for the benefit of a new employer. When this type of situation occurs, business owners start looking for legal help to prevent the use or disclosure of their customer lists, trade secrets, or confidential business plans. Often times though, at least some of the damage has already been done and the business owner is left scrambling to protect its confidential information and avoid additional financial loss. Fortunately, Arkansas law provides businesses with a number of opportunities to protect confidential information from being misappropriated or wrongfully disclosed.

For example, in the employment setting, an employer may consider utilizing a non-compete agreement (also known as covenants not to compete) or a confidentiality agreements. These agreements require employees to refrain from competing with their former employer for a certain period of time after the employment ends. Non-compete agreements can also protect the buyer of a business by prohibiting the seller of the business from competing with that business for a period of time. In order to be enforceable, a non-compete agreement must meet certain criteria and contain certain terms. Importantly, Arkansas courts will not “blue-pencil” an agreement, therefore, if one provision in the non-compete agreement fails, the entire agreement fails. Another type of protection of confidential information comes in the form of trade secret protection. In Arkansas, trade secrets are protected by both the common law and the Arkansas Trade Secret Act (“ATSA”).

The ATSA protects trade secret information that is wrongfully disclosed or wrongful acquired. However, not all confidential information qualifies as a “trade secret” under the ATSA, therefore, business owners and operators should seek legal advice to help determine whether their confidential information may warrant protection under the ATSA. A third type of protection for business information is provided under a federal law commonly known as the Computer Fraud and Abuse Act (“CFAA”). The CFAA provides broad protection to information that is stored on a computer, whether or not the information is actually confidential. Additionally, the CFAA does not require the actual use or misappropriation of the information. Instead, under the CFAA, it is the accessing of the information that creates a cause of action. Because obtaining protection under the CFAA does not require a “bad act”, so to speak, the CFAA may actually provide more protection to Arkansas businesses since the information to be protected does not have to meet the somewhat rigorous standards of being a “trade secret”. The nature of protection that may be afforded to a business’s valuable, commercial information varies greatly depending upon the type of information to be protected and the manner used for protection.

Many other avenues of protection, not discussed in detail in this article, exist – including recently enacted computer crime statutes in Arkansas and trademark protection. The attorneys at Keith, Miller, Butler, Schneider & Pawlik, PLLC can consult with you regarding the applicability and interpretation of state and federal laws which provide protection for confidential business information. If you have any questions about the current protection available in Arkansas, we encourage you to contact us.