What is a Trade Secret and Trade Secret Law

What is a Trade Secret and Trade Secret Law

A trade secret is any piece of information used in a business that isn't generally known to the public. This is valuable because the information is kept secret. Trade secret law can apply to a broad variety of information, including formulas, patterns, business plans, designs and procedures. The law provides some protection against others from misappropriating, or improperly obtaining, your secret.

Why rely on trade secret law?
People rely on trade secret law because of the shortcomings of other areas of law. Copyright law prevents others from copying certain works, but copyright law only applies to the expression of ideas and not the underlying idea itself. Patent law prevents others from using your idea, but some things, such as recipes, aren't patentable. Furthermore, patents only last for a specific period of time. It's possible to keep a trade secret forever. A perfect example is the secret formula for Coca-Cola®: It's still a secret despite being over 100 years old. And the secret formula can't be patented because it would be considered a recipe.

Trade secret law can have its disadvantages as well. Although the law prevents others from stealing your secret, others may figure out your secret by reverse engineering (taking something apart to identify what it is made of). The trade secret will no longer be protected once someone figures it out and discloses it to the public. Also, it may be harder to profit from the secret--it's hard to market your idea while trying to keep it secret. It's easier for a patent owner to give permission to someone to use an invention in return for money.

Legal requirements
Although the requirements may vary from state to state, the requirements for a trade secret are:

• the secret isn't known to the public and it isn't readily ascertainable by the public;
• the owner has used reasonable efforts to maintain secrecy; and
• the secret has value because of its secrecy (i.e., the owner has an advantage over others who do not know the secret).

Once you establish a trade secret, the law provides protection against others from misappropriating your secret. You may be able to sue to prevent people from disclosing your secret or you may sue to get damages if someone reveals your secret. Federal law also makes the misappropriation of trade secrets a crime.

What is misappropriation?
There are two ways that misappropriation can occur:

• Using improper means, such as theft or fraud, to obtain the secret. If someone breaks into an office to steal a secret business plan, this would constitute misappropriation.
  
  
• Obtaining the trade secret from the breach of a confidential relationship. This happens is when the secret is disclosed by someone who was required to keep the trade secret confidential. The easiest way to create a confidential relationship is to have a confidentiality or nondisclosure agreement that prohibits the disclosure of the trade secret. For example, if you obtain a trade secret from someone knowing that that person had signed a confidentiality agreement, you would be misappropriating the trade secret. In addition, the person disclosing the secret would be can be sued for breach of contract.

Trade secret law only protects against the misappropriation of your trade secret. If someone comes up with the same idea on his or her own, this would not be misappropriation. The law doesn't prevent someone from using the same idea if it was arrived at independently.

In addition, reverse engineering is also not considered misappropriation. Trade secret law doesn't prevent someone from analyzing the end product to figure out the trade secret behind it.