Trade Secret Law

Trade Secret Law

Trade secret law protects methods, processes, or information that is valuable because it is kept secret.  See What is a Trade Secret.  If a company develops an effective, efficient, or inexpensive process for performing an action, or a highly desired recipe or formula, the most valuable way to commercially exploit the creation may be to keep it a secret.  By maintaining secrecy over that information, the creator can exercise a monopoly over his or her creation, potentially indefinitely.

For example, one of the most notorious trade secrets is the formula for Coca-Cola.  Rather than disclosing the formula and enabling others to profit from its creation, the Coca-Cola Company has protected the formula as a trade secret.  Because it has successfully maintained the secrecy of its most valuable piece of intellectual property, the Coca-Cola Company is the only company on the market that manufactures and sells the desirable soft drink.

Trade secret law is largely governed by the Uniform Trade Secrets Act (UTSA) which has been adopted by 45 states.  Those states that have declined to adopt the UTSA follow common law and/or the Restatement of Torts trade secret provisions.  Compared to the Restatement, the UTSA is considered simple and easy to apply as it focuses on reasonable efforts to maintain secrecy.  Critics of the UTSA find that the detail of the Restatement offers better instruction to those attempting to maintain trade secrets.

Trade Secret and Patent

Trade secret law is often best understood when compared to patent law.  While the same information could conceivably be protected as either a patent or a trade secret, certain kinds of information will better benefit from trade secret protection.  If the information, process, method, formula, or technique is easily discoverable, visible to the public, or could be reverse engineered, a patent is likely the best form of protection.  If, however, the information, process, or method can be kept secretly within the company and is not obvious to the public or competitors, maintaining the information as a trade secret may be more beneficial.

Patent law differs from trade secret law in three major ways: disclosure, burden, and duration.  First, to be eligible for a patent, inventors must disclose how the invention works to enable other skilled inventors to recreate the invention.  This is in contrast to trade secret protection, which is lost immediately if it is disclosed.

Second, to maintain a trade secret, the burden is on the owner to use reasonable efforts to maintain secrecy.  While the phrase, “trade secret protection” is used in the trade secret context, it is important to note that trade secret holders must do most of the protecting themselves.  The trade secret holder must, in contrast to patent law, continuously guard its trade secrets from disclosure.  If a trade secret is revealed, the courts will only offer protection if the trade secret holder can show that improper means were used to acquire the trade secret.

Third, the duration of patents and trade secrets differ significantly.  While patents last for a fixed term of 20 years, trade secret protection can be perpetual.  Trade secrets may last for hundreds or years or more.  Trade secret protection only terminates when the secret is disclosed.

Trade Secret Litigation

At times it may be necessary for the owner of a trade secret to bring an action for trade secret misappropriation to enforce its intellectual property rights.  A trade secret misappropriation action may arise if a trade secret is acquired or misappropriated through improper means.  Improper means includes obtaining a trade secret through theft, bribery, misrepresentation, breach of fiduciary duty, or espionage.  One may be liable for trade secret misappropriation for acquiring a trade secret through improper means or with knowledge that the information was acquired through improper means.

Often, in order to prove that a trade secret is valid, it must be disclosed to the court.  In these situations, it is possible to obtain a protective order from the court preventing further disclosure.