What Is a Trade Secret and How Is It Different From Patents and Copyrights?
A Trade Secret is any information not generally known to the public and from which a company derives value mainly because the information is not generally known. Alternatively, in the case of both patents and copyrights, information must be disclosed to the public as a prerequisite to protection under their respective federal statutes. Thus, Trade secrets differ from patent and copyright protection, in the most basic sense, because of the requirement that the information remain “secret” (generally unknown to the public). If Trade Secret information is disclosed to anyone without proper measures in place (such as confidentiality agreements or non-disclosure agreements), any protection afforded Trade Secrets in your State could be lost.
Regardless of which State you reside in, Trade Secrets are typically defined as information that is:
(1) not generally known to the public;
(2) attains its value because it is not generally known to the public; and
(3) is the subject of reasonable measures by the information owner to maintain confidentiality.
What Are Some Examples of Trade Secrets?
Typical Trade Secrets include customer lists, proprietary software, a process, a technique, a device, a design, a model, a formula, an idea, a concept, a recipe, a business method, a pricing method or any other information that derives value from not being generally known to the public. The definition of Trade Secrets is left intentionally broad so as to allow protection for all manner of intangible assets which are not otherwise covered under other Intellectual Property statutes. Indeed, Trade Secrets can often be a company’s most valuable asset.
Probably the most well known example of a Trade Secret is the formula for Coca-Cola, code name “Merchandise 7X.” The formula for Coca-Cola would lose a large amount of its value if public disclosure of the formula was required to obtain protection.
How is Protection for Trade Secrets Acquired?
Trade Secrets are the most intangible asset that a company will possess, and often the most valuable. However, unlike other intangible assets, like patents and copyrights that require registration and disclosure in order to be protected, Trade Secret protection depends entirely on the standard of care applied by the owner of the information. Indeed, to meet the legal definition of a Trade Secret, the information owner must take reasonable steps to protect the secrecy of the information. Reasonable steps include, but are not limited to:
(1) confidentiality agreements and non-disclosure agreements with employees and others;
(2) limitations on the distribution of the information within the company to only those with a need to know;
(3) limiting the numbers of copies of the information;
(4) restricting access to the information via passwords or locked filing cabinets; and
(5) stamping the information as “confidential” or “proprietary.”
Of course, this list is not exhaustive and should not be considered as a replacement for clear policies and procedures relating to your Trade Secret information.
A strong Trade Secrets protection plan can prevent others from appropriating your Trade Secrets and undermining your competitive advantage in the marketplace. If you are involved in Trade Secrets litigation or want to improve your Trade Secrets protection strategies please contact Mr. Johnson for a free consultation.