Trade Secrets
A trade secret is any information that derives its value by virtue of remaining secret and is in fact the subject of efforts to maintain its secrecy. A trade secret is a secret piece of information that provides a competitive advantage over those who do not know the information. A trade secret can be virtually anything: a formula, pattern, program, method, technique, process, sources of supply, customer lists, business and marketing plan, or new product under development. Once the secret is disclosed, it ceases to be a trade secret.
Trade secrets are a product of state law. There is no registration procedure for trade secrets and no formal procedure exists for filing an application with any governmental authority. Trade secrets can include matters that are patentable, and indeed many companies choose to rely on trade secret protection rather than patents for their inventions, as trade secrets are not publicly disclosed.
A trade secret must be generally unknown in the industry. Absolute secrecy is not required. The information must generate some independent economic value by virtue of being known only to the possessor. A company must take affirmative steps to keep the information secret, such as locked facilities, security measures, confidentiality agreements for employees, and other similar measures.
Trade secrets are not necessarily exclusive, as patents and trademarks are. It is possible for two companies to independently develop and protect the same confidential information. Trade secret law only entitles the owner to prosecute those who acquire the secret through unlawful or improper conduct. Unlawful or improper conduct includes bribery, theft, fraud, electronic surveillance and breach of contract or company policies.
It is perfectly lawful for a competitor to purchase a company’s product and tear it apart to see how it works, thereby discovering a trade secret independently. A competitor can use any trade secrets it finds in the course of such an examination, or at a trade show or in product literature. Patent protection should always be obtained if the possibility of “reverse engineering” by competitors is high.
Trade secrets can last as long as the information remains a secret. The theft of trade secrets can be stopped through injunctions and the owner may also sue for actual damages, punitive damages, the competitor’s profits and attorneys’ fees. Trade secret litigation often poses the danger that the secret will be leaked to the public in spite of a court’s secrecy orders.
