What is a Trade Secret?
A trade secret is any piece of valuable information that is not
generally known to the public, which a business properly safeguards by
limiting how and to whom it discloses such information. Trade secret law
applies to a broad variety of information, including business plans,
formulas, designs, patterns, procedures, and recipes. Although the
definition of a trade secret varies from state to state, the three basic
requirements are:
- information that is unknown to the public and not readily
ascertainable by the public;
- which the owner has used reasonable efforts to safeguard; and
- is valuable because it provides the owner with a competitive
advantage in the market place.
If the information is deemed to be a trade secret under the
applicable state law, the law will provide the owner with certain remedies to
address misappropriation, or attempted misappropriation of the protected
information, such as the right to get an injunction to prevent
disclosure and/or monetary damages. Federal law also makes the
misappropriation of trade secrets a crime.
Why rely on trade secret protection, as opposed to
patent or copyright?
Trade secret protection is valuable because of shortcomings in other
areas of intellectual property protection. For example, while
copyright may prevent others from copying certain works, it only applies to the
expression of an idea and not the underlying idea itself. Similarly,
while patent prevents others from using the idea, patent protection is
not afforded to some things, such as recipes. In addition, both
copyright and patent protection is limited to a certain number of years, while
trade secret protection can last indefinitely.
Trade Secret Protection Limits
Trade secret protections merely provide a means to prevent others
from stealing your trade secret(s), and damages in the event it is
misappropriated. Trade secret law only protects against the
misappropriation (discussed below) of your trade secrets. If someone independently
discovers the trade secret (e.g. by taking something apart to identify the
components) or somehow comes up with the same idea, this would not be
misappropriation. Trade secret protection, therefore, will not insulate
you from reverse engineering or independent creation. Moreover, if
someone discovers the secret and discloses it to the public, trade secret
protection can be lost.
What is misappropriation?
Misappropriation of a trade secret can occur in one of three ways: (1)
using improper means, such as theft or fraud, to obtain the trade
secret; (2) illegally disclosing the trade secret by breaching a
confidentiality clause or non-disclosure agreement; and (3) illegally obtaining
the trade secret from someone known to have breached a confidentiality
clause or non-disclosure agreement. Thus, not only can the person who
disclosed the trade secret be sued for breach of a non-disclosure
agreement or similar contract, but the person obtaining the trade secret can
also be sued for misappropriation for obtaining the trade secret
information from someone knowing that that person had signed a
confidentiality agreement.
