TRADE SECRET PROTECTION IN THE UNITED STATES
Why are trade secrets important?
Trade secrets play an important role in the development of commercial competitiveness, economic gain, and strategic positioning, especially for startups and R&D-intensive industries.
A trade secret is a type of intellectual property (IP) that includes valuable business information that is kept confidential to give a company a competitive advantage. Unlike patents, trademarks, or copyrights, trade secrets are not registered or publicly disclosed, making their protection entirely dependent on secrecy.
In essence, a trade secret refers to any information that:
- Is not generally known to the public or to others in the relevant industry,
- Has commercial value because it is secret, and
- Is subject to reasonable steps taken by the owner to keep it confidential.
Types of Information That Can Be Trade Secrets
Trade secrets can take many forms, including:
- Formulas and Recipes:
For example, the secret recipe for Coca-Cola or a special blend of spices used by KFC. - Manufacturing Processes or Techniques:
Unique methods of production or technology that give a business an edge, such as a secret method for producing a product more efficiently or with higher quality. - Business Strategies and Plans:
Strategic information like marketing plans, pricing strategies, or customer databases that provide a company with a competitive edge. - Software and Algorithms:
Proprietary software code or algorithms that are integral to a business’s product or service offerings. - Client Lists and Supplier Information:
Confidential customer lists, supplier contacts, or other relationships that are critical to a business’s success. - Designs, Blueprints, and Drafts:
Unpublished architectural designs, engineering drafts, or prototypes of products that are still in development.
Legal Protection of Trade Secrets
Trade secrets are not registered with any government agency. Instead, they are protected through legal mechanisms that require the owner to maintain the confidentiality of the information. Key elements of trade secret protection include:
- Confidentiality Agreements:
Businesses often use non-disclosure agreements (NDAs) or confidentiality clauses in contracts with employees, contr - Reasonable Security Measures:
The owner must take reasonable steps to protect the secrecy of the information. This could include restricting access to the trade secret, using password protection for digital information, implementing physical security measures, or limiting knowledge of the secret to only those who need to know. - Legal Recourse in Case of Misappropriation:
If a trade secret is stolen, disclosed, or used without permission, the owner can take legal action. This includes filing a lawsuit for trade secret misappropriation under both civil and criminal laws in many jurisdictions. In some countries, such as the United States, the Defend Trade Secrets Act (DTSA) provides federal protection and allows companies to bring legal action in federal court for trade secret theft.
EXAMPLE OF A BIG TRADE SECRET
- The trade secret owner cannot protect its rights if it must disclose the secret in open court.
- Courts can use tools that maintain the ongoing secrecy of the trade secret and still permit trial preparation and conduct. EXAMPLES:
– Protective orders
– In camera reviews by the judge or magistrate
– Closed courtrooms