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Trade Secrets

Unlike patents, trademarks, and copyrights, trade secrets are not subject to registration.  No governmental body grants “trade secret status”. 

Instead, trade secret protection falls under state law, and trade secrets themselves must be safeguarded by the company asserting that the information is a secret. At least 40 states and the District of Columbia have adopted some form of the Uniform Trade Secrets Act (“UTSA”). 

UTSA defines a trade secret as:

(1) Information, including a formula, pattern, compilation, program, device, method, technique, or process (2) that derives independent economic value, actual or potential, from not being generally known or readily ascertainable through appropriate means by other persons who might obtain economic value from its disclosure or use; and (3) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

To prove a case defending a trade secret, you have to prove the following:

  1. The claim must qualify for trade secret protection, i.e. it must be the type of information trade secret was intended to protect, and it must not be generally known.
  2. You must establish that reasonable precautions were taken to prevent disclosure of the secret information.
  3. You must prove that the information was wrongfully acquired by another.

United States common law, as explained in the Restatement of Torts, is used by most courts to analyze whether the trade secret is protectable. According to Restatement Sections 757 and 758, these are the six factors to be considered in determining whether information constitutes a trade secret:

  1. The extent to which the information is known outside the claimant's business;
  2. The extent to which the information is known by employees and others involved in the business;
  3. The extent of measures taken by the claimant to guard the secrecy of the information;
  4. The value of the information to the business and its competitors;
  5. The amount of effort or money expended by the business in developing the information; and
  6. The ease or difficulty with which the information could be properly acquired or duplicated by others.

Other points to keep in mind:

Use of information that someone else considers a trade secret is not always improper.  Trade secrets may be lawfully obtained by independent discovery, reverse engineering, or inadvertent disclosure resulting from the trade secret holder's failure to take reasonable protective measures.

Unlike patents, trade secrets do not last for a specific term of years.  Trade secret protection continues indefinitely until public disclosure of the protected information occurs. 

Moreover, an inventor must publicly disclose the means to reproduce an invention in exchange for receiving the limited monopoly over such invention that patent protection provides.  Thus, some inventors must choose between either patent protection or trade secret protection; the same invention cannot be protected by both simultaneously.

Beacon Legal Group stands ready to assist you with any trade secret issues you encounter should they arise.