Generally, a trade secret is valuable information that gives a business a competitive edge over other businesses. The "information" can be a formula, pattern, compilation, program, device, method, technique, or process. Specifically, a trade secret includes these three elements:

  1. The information is not known to the public
  2. The information is economically beneficial to the holder
  3. The information holder makes reasonable efforts to maintain its secrecy

What Are the Differences Among Trade Secrets, Trademarks, and Patents?

Different statutes protect the different kinds of intellectual property. Federal statutes (namely, the Lanham Act and the Patent Act) protect trademarks and patents, whereas state laws generally protect trade secrets. Most states have enacted the Uniform Trade Secrets Act (UTSA). However, the theft or misappropriate of some trade secrets can be a federal crime.

Trademarks and patents are not kept secret from the public, and it is often advantageous for the owner of a trademark or patent to let as many people as possible know that they own that specific trademark or patent. On the other hand, trade secrets are concealed from the public because if the information becomes public, the trade secret holder will lose its economic edge.

Finally, trademarks and patents are subject to a number of legal exemptions that do not apply to trade secrets. People can normally satire or parody trademarks; such parodies and satires are usually speech protected by the First Amendment. Also, patents typically expire after twenty years, while trade secrets can extend indefinitely.

How Do Businesses Protect Their Trade Secrets?

Companies can legally protect their trade secrets by adding certain terms to employment contracts. Non-Disclosure Agreements (NDA) are the most straight-forward protections. An NDA requires employees to keep company information confidential. Companies can also use Non-Compete Covenants to prevent ex-employees from disclosing trade secrets to competitors.

Companies can also develop policies and procedures for an employee’s use of the trade secret and communications regarding the trade secret. Companies that choose to protect their trade secrets through this method normally address these policies in trainings or orientations as soon as the employee is hired. A company that does have such policies should clearly convey its intent to maintain the confidentiality of the trade secret so that the typical employee understands the necessity of confidentiality.

Difficulties Surrounding Trade Secret Lawsuits

Most trade secret lawsuits are between the alleged holder of a trade secret and its competitor(s) or former employee(s). In lawsuits against competitors, the competitors will often claim that they created the trade secret first. For this reason, it is very important for companies to maintain a record of the dates of when they created their trade secrets.

Do I Need an Attorney?

If you believe that someone is using your trade secret without your permission, you should contact an experienced attorney. Your attorney can determine whether you have a valid claim. If you have a claim, you may be entitled to money damages or an injunction to stop the use of your trade secret. If someone used unlawful means, such as theft, to acquire your trade secret, the perpetrator could also be subject to criminal penalties.

If you are considering using information that may be someone else’s trade secret, or if you have been accused of taking someone else’s trade secret, you should speak with a lawyer immediately to evaluate your liability.