Overview: Trade Secret Law

The subject matter of trade secret law is almost unlimited in terms of the content or subject matter that may be protected. Trade secret law varies by state, but typically relies on private measures, rather formal registration, to preserve exclusivity. “A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others” (U.S. Legal Code, The Restatement (Third) of Unfair Competition, §39). The secret may be a formula; a process of manufacturing, treating, or preserving materials; a pattern for a machine or other device; or a list of customers. Id.

The two major restrictions on the domain of trade secrets are (1) the requirements of secrecy and (2) competitive advantage. An intellectual work is not a secret if it is generally known within the industry, published in trade journals, reference books, etc., or readily copyable from products on the market.

Although trade secret rights have no built-in expiration, they are extremely limited in one important respect. Owners of trade secrets have exclusive rights to make use of the secret only as long as the secret is maintained. If the secret is made public by the owner, then trade secret protection lapses and anyone can make use of the information. Moreover, owners' rights do not exclude independent invention or discovery. Within the secrecy requirement, owners of trade secrets enjoy management rights and are protected from misappropriation. This latter protection is probably the most important right granted, given the proliferation of industrial espionage and employee theft of intellectual works. If you need help or have questions about a trade secret issue it is recommended you contact an experienced attorney at The Law For All today.

What’s Required for Trade Secret Protection?

Trade Secrets protect both oral and written information (e.g., business plans, sales strategies, customer lists, computer source codes, methodologies, formulas, etc.) knowledge of which, if maintained in secrecy, provides an economic advantage from not being generally known, or readily ascertainable by proper means. Information concerning what does not work is as protectable as information concerning what does work. The reasoning is that competitors should bear the expense of their own trials and errors and not profit from your experience.

Trade secrets are safeguarded by either an "express contract" to maintain secrecy (e.g., a written or oral agreement to treat the information as secret) or an "implied contract" to maintain secrecy. When parties participate in a confidential relationship such as partners, employer/employee or contractor/subcontractor the law will usually impose a duty to maintain secrecy even if the parties did not expressly agree to this. However, to withstand the rigors of litigation, in most states it is recommended that the terms of such an agreement be in writing. The Law for All can help you with this process on a flat fee basis, contact us today!

Factors to Consider: Benefits of Trade Secret Protection

(1) There is no limit on the duration of trade secret protection. Protection lasts as long as the information or technology is kept secret or confidential.

(2) Trade secrets have far less prerequisites to be awarded protection. Trade secrets can protect technology which is unable to receive protection under any other doctrine.

(3) Protection does not require any government registration or filing fees.

(4) Most industrial nations have laws that can be used to protect your trade secrets in other countries throughout the world.

(5) It is still possible to enter licensing agreements to specify permitted uses and required protections the same as you would do with one of the other IP protections.

(6) Users are unlikely to make unlawful copies or unauthorized distribution if they each sign an agreement personally.

(7) Trade secret protection can be used to protect any type of Intellectual Property information while you consider if the patent route is practicable or if trademarks and copyrights should be pursued as well.

Factors to Consider: Costs of Trade Secret Protection

(1) There is no protection if another person independently creates or discovers your trade secret subject matter.

(2) Trade secret subject matter that is available in the market place can be "reverse engineered" and then duplicated by your competitors.

(3) Requires appropriate measures for preserving trade secret status, such as restricted access, secrecy agreements, and physical security measures. If not taken, courts are likely to hold the information was not treated as a confidential trade secret.

(4) In order to enforce your rights, owners are financially responsible for self-policing their trade secrets. The owner will have to bear its own legal costs (very expensive) unless there is a contract between the parties or the court provides otherwise. Further, trade secret law varies by state; this can create issues when opposing parties seek to apply laws from different states.

(5) Even if you do prevail in the lawsuit, once a breach of confidentiality occurs, the information may cease to be protectable as a trade secret.

Is it worth It?

Overall yes, the number of benefits outweighs the costs associated with trade secret protection. This is because it costs virtually nothing to have trade secret protection (unless there is a complicated effort required to maintain the secret). However, you must sincerely trust anyone to who you reveal the information. Although, cheap with an indefinite duration, once revealed to the public, your protection vanishes. You must be a sophisticated business person or trust no one to keep your information secret. Contact The Law for All today to help you protect your trade secret. We offer flat fee service options so legal fees are predictable and you have no surprises on your billing statement.