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What is a Protectable Trade Secret?

Introduction to Trade Secrets

How To Protect Your Trade Secrets?

Introduction to Trade Secrets
©2019, Melissa C. Marsh.
Written: 11/15/2000  
By: Melissa C. Marsh

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:

  1. information that is unknown to the public and not readily ascertainable by the public;
  2. which the owner has used reasonable efforts to safeguard; and
  3. 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.

Copyright 1999-2019 Melissa C. Marsh. All Rights Reserved. All Information on this website is subject to a Disclaimer and Use Agreement. This information is provided as general information only and should not be construed as legal advice. We advise you to seek the advice of competent legal counsel to address your own specific questions, facts and circumstances.

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© Copyright 1999-2019 Melissa C. Marsh. All Rights Reserved