A trade secret is a form of intellectual property. It is characterized as any information, process, formula, technique, or method that is not readily known by the public and delivers an economic benefit to its holder. For information to keep its position as a trade secret, the holder must carefully preserve its confidentiality.
Unlike other forms of intellectual property, such as trademarks and patents, the items protected by trade secret laws are not always immediately “visible” or discernible in physical form. They often consist of processes, methods, or “ways of doing things.” Thus, one way to grasp the concept of a trade secret is to examine different examples of them.
What Are Some Examples of Trade Secrets?
Many different types of information and processes can be considered trade secrets.
Some common examples of trade secrets are:
- Techniques for converting raw materials into other usable materials
- Recipes for food or food products
- Techniques of manufacturing consumer products
- Chemical formulas for cleaning products or other similar goods
- Technological processes, such as computer program processes or scripts
Popular examples of trade secrets include the recipe for Coca-Cola and the formula for WD-40. Trade secrets may also include items that an individual or company has not chosen to patent yet, such as a new plant hybrid or mechanical invention.
How Long Does Trade Secret Protection Last?
Unlike copyrights and other types of intellectual property, one does not register their trade secrets with a government agency. Instead, trade secret protection is typically secured through contracts, non-disclosure agreements, non-compete forms, and other similar documents. These deliver guidelines for individuals exposed to information regarding the trade secret to prevent them from sharing that information with anyone who may share the information with the company’s competitors.
A contract or agreement designed to safeguard the trade secret typically limits the individual’s ability to communicate the information with others, which allows the trade secret to remain a secret.
Therefore, trade secret protection terms should be explicitly stated in the contract terms. Since there is no registration process for trade secrets, the expiration of the protection must be expressly stated in the written documents if there is any expiration. Also, if the trade secret is released to the public or is no longer deemed to be confidential, the holder will usually lose protection and exclusive rights to the secrets.
Trade secret misappropriation is a significant legal issue and can lead to problems for various parties to the agreement. Misappropriation or theft of a trade secret can also lead to criminal consequences for the violating party. Therefore, it is crucial that the terms for confidentiality are clearly stated in all documents and that all parties understand the terms.
What Is Misappropriation?
Misappropriation is the improper acquisition, disclosure, or use of a trade secret. Under trade secret law, misappropriation, not an infringement, is the primary reason for a lawsuit.
What Is “Improper Acquisition”?
Improper acquisition ensues when you get a trade secret by using improper means. The means do not have to be criminal to be improper, although illegal means are almost automatically improper means.
Sometimes, even legal actions can be improper. Some common types of improper acquisition means are:
- Breach or encouraging someone else to breach a duty to maintain secrecy
- Spying through electronic or other means
- Industrial espionage
Are There Ways to Acquire Trade Secret Information That Are Not Improper?
There are many ways to acquire trade secrets that are not deemed improper under trade secret law.
Some commonly accepted methods are:
- Discovering the trade secret independently
- Discovering the trade secret through reverse engineering
- Obtaining the trade secret from a publication
- Seeing the item publicly used or displayed
What Is Improper Disclosure or Use?
Improper disclosure or use is the disclosure or use of a trade secret, without the express or implied consent of the trade secret owner, by a person who:
- Acquired the trade secret through improper means
- Knew that the information was acquired wrongfully
- Knew that he should be under a duty to maintain secrecy
Is it an Improper Disclosure to Disclose a Trade Secret to Someone Who Will Not Use it?
Even if the individual you disclose a trade secret to has no intention of using or disclosing the trade secret, you may still have made an improper disclosure. The value of a trade secret depends almost wholly on secrecy. Without that secrecy, a trade secret is useless and unenforceable. Telling just one individual can destroy a trade secret.
If I Use Information I Learned at a Prior Job, Can I Be Liable for Improper Use of a Trade Secret?
If you use information you learned at a previous job, you may be liable for improper use of a trade secret. Of course, you can use the skills, knowledge, and experience you obtained at a former job, but it may be challenging to draw the line between this type of employee knowledge and the knowledge of trade secrets.
For example, even if you do not take any tangible information about a trade secret, like a customer list or a formula, if you have that list or recipe memorized and use it at your next job, you may be liable for trade secret misappropriation.
What Is Industrial Espionage?
Industrial espionage occurs when a person or party gains access to a company’s information in a way that is illegal, unethical, or constitutes unlawful business practices. The term “espionage” is a synonym for “spying.” Thus, industrial espionage includes unlawful observation of company activity, unlawful listening (such as a wiretap), and unlawful access to company information, which all constitute spying on the company.
Industrial espionage is often called economic espionage or corporate espionage to distinguish it from more traditional forms of national security espionage. Crimes such as identity theft, piracy, and computer fraud often involve some form of industrial espionage, wherein one country spies on another country. The federal and state governments govern corporations through various laws, such as the Economic Espionage Act of 1996.
What Are Some Examples of Industrial Espionage?
Industrial espionage can occur through a person acting on their own behalf. An example of this is when a dissatisfied employee breaks into the company records to cause damage to the company. The espionage can also arise on behalf of a competitor company. An example of acting on another company’s behalf is when a company hires an employee (or an outside party) to investigate their competitor’s business illegally.
Some common examples of industrial espionage include:
- Breaking into company files or trespassing onto property without proper authorization
- Posing as a worker to learn company trade secrets or other confidential information
- Setting a wiretap on a competitor’s phone
- Hacking into computers
- Sending viruses or malware to a competitor’s website
In particular, technology-based companies are prone to industrial espionage issues, especially novel ideas or technology products. For example, biotechnology companies, software firms, and automobile companies tend to be the prey of corporate espionage. Transferring stolen company property or stolen trade secrets can also be regarded as espionage.
How Are Industrial Espionage Incidents Remedied?
Industrial espionage violations can result in a mix of different legal consequences. For one, a court may issue civil remedies, including damages awards for lost profits or an injunction to return stolen property or information. If the culprit has been using stolen trade secrets or copyrighted materials, the court may also issue a cease and desist order for profit.
Should I Hire a Lawyer to Help with Trade Secret Issues?
Trade secrets are essential for the operation of many business endeavors. You may need to hire an intellectual property attorney in your area if you need assistance with trade secret laws.
Your attorney can provide you with legal research and advice to help you understand your rights regarding a particular trade secret. If you have any legal disputes, or if you need to file a lawsuit, your lawyer can represent you during court proceedings.