Intellectual Property for CS Students: Trade Secrets - Introduction






Trade secret

Definition of Trade Secret:

A trade secret is any information that economically benefits the secret-holder by not being disclosed, and that the secret-holder takes reasonable efforts to keep secret. [1] Since trade secrets are a state-law construct, this definition may be slightly different depending on what state one is in. However, as of the time of this writing, a majority of states have adopted the Uniform Law definition discussed below.

While anyone can be legally liable for infringing a patent, copyright, or trademark, only particular people can be liable for disclosing a trade secret. In particular, people in a contractual relationship with the owner of the trade secret, such as employees, are likely to have legal obligations not to disclose the trade secret. Employers retain this obligation even if they leave the job, and in some cases their employers can contractually stop them from taking particular new jobs, if the trade secret information would inevitably be relevant to the new job. Trade secret protection is much "thinner" than patent or copyright, because if the secret gets out, the owner may lose any exclusive rights to it (at which point the owner will probably wish she had sought a patent, instead).

From the definition, six rough factors are considered when analyzing a trade secret. [2]

  1. How extensive knowledge of the secret is to people in the same industry or the general public. If the information is well known, then it isn't really secret. If the information isn't actually secret, then there is no harm in revealing it.
  2. The conditions surrounding knowledge of the secret in the secret-holder's business. One important method of keeping a trade secret is to ensure that only those employees that need to know the secret know it. In addition, the secret-holder should endeavor to secure legal protections over the knowledge of the secret, such as a non-disclosure agreement, in the employment contract.
  3. The measures that the secret-holder has taken to maintain secrecy. The secret-holder must make reasonable efforts to ensure that the secret stay secret. This differs from the previous factor in that it is address overall security measures of the business, such as file encryption, alarm systems, and guards. Furthermore, if the secret cannot be completely protected with reasonable means, this factor will be forgiven to some degree. [3]
  4. The value of the secret information. If the secret has little or no commercial value the secret will not be protected.
  5. The nature of the information itself. If the information itself is of a special nature, such as the famous trade secret ingredient list for Coca-Cola, then it will be afforded a greater measure of protection. Also, if the secret-holder expended a considerable sum to create the secret, it is more likely to be protected.
  6. The difficulty for others to legally replicate the secret. If the information could be easily replicated, then the protection afforded to it will be less.

Violations of Trade Secret:

Disclosure of a trade secret is only actionable when the secret was misappropriated. [4] While misappropriation covers a huge range of activities, unintentional disclosure of the secret by people with no duty to keep the secret is not covered. The use of "non-disclosure agreements" (NDAs) helps to fill this last gap. After signing an NDA, a person has made a contractual promise not to disclose the secret, and therefore has a duty to keep the secret. Any unauthorized disclosure by a person under an NDA may create liability.

Other violations of trade secret protection include actually stealing the secret, and several circumstances that place liability on third parties who learn the of trade secret and then disclose it.

Trade Secrets and Patents

If one chooses to protect an invention through trade secrets rather than patents, there are several considerations one should be aware of. First, the Patent Act includes the doctrine of Abandonment/Suppression/Concealment. Patent laws are intended to reward inventors who disclose their inventions to the public. If an invention is being suppressed or concealed, and another person invents and patents it, then the suppressor will be unable to stop the patent. [5]