Trade Secrets

What Are They?

The USPTO provides the following information concerning Trade Secrets. (Trade Secret Policy)

“A fourth type of intellectual property, in addition to patents, trademarks, and copyrights, is trade secrets. Trade secrets consist of information and can include a formula, pattern, compilation, program, device, method, technique or process. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.

As a member of the World Trade Organization (WTO) and a party to the Agreement on Trade Related Aspects of Intellectual-Property Rights (TRIPS), the United States is obligated to provide trade secret protection. Article 39 paragraph 2 requires member nations to provide a means for protecting information that is secret, commercially valuable because it is secret, and subject to reasonable steps to keep it secret. The U.S. fulfills its obligation by offering trade secret protection under state laws. While state laws differ, there is similarity among the laws because almost all states have adopted some form of the Uniform Trade Secrets Act. The language of the Uniform Trade Secret Act is very similar to the language in TRIPS.

Courts can protect trade secrets by enjoining misappropriation, ordering parties that have misappropriated a trade secret to take steps to maintain its secrecy, as well as ordering payment of a royalty to the owner. Courts can also award damages, court costs, and reasonable attorneys’ fees. This protection is very limited because a trade secret holder is only protected from unauthorized disclosure and use which is referred to as misappropriation. If a trade secret holder fails to maintain secrecy or if the information is independently discovered, becomes released or otherwise becomes generally known, protection as a trade secret is lost. Trade secrets do not expire so protection continues until discovery or loss.

Trade secret protection is an alternative to patent protection. Patents require the inventor to provide a detailed and enabling disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time. Patents do expire, and when that happens the information contained within is no longer protected. However, unlike trade secrets, patents protect against independent discovery. Patent protection also eliminates the need to maintain secrecy. While most anything can be kept secret, there are limitations on what can be protected by a patent. If a given invention is eligible for either patent or trade secret protection, then the decision on how to protect that invention depends on business considerations and weighing of the relative benefits of each type of intellectual property.”

Key concepts concerning Trade Secrets:
  • They must be kept secret (reasonable precautions include marking documents containing trade secrets “Confidential,” locking trade secret materials away after business hours, maintaining computer security and only providing access to secret information to people with a reasonable need to know)
  • Use Nondisclosure Agreements whenever confidential information is shared outside the organization
  • They can be more valuable than patents if the secret ingredient is undetectable in the product or if a process can be kept secret since there is no disclosure and there is no expiration
  • There are, however, proper ways to learn trade secrets that would not violate any trade secrets protections. If a company reverse engineers a competitor’s product and figures out how it was made, they are free to use that information, even if the competitor did all it could to keep that information secret.

How To Protect Them

Four criteria must be met for a trade secret to exist.
  1. The trade secret must be technical information or business information.
  2. The business must derive value from this information being kept secret.
  3. The information can’t generally be known to the public or competitors (i.e. it must actually be secret).
  4. The information must be considered secret and the business must make reasonable efforts to keep it secret. A mere desire to keep it secret is not enough.

Technical information includes things like plans, designs, formulas, manufacturing methods, specialized equipment, or software. Business information refers to private financial information, cost information, market analysis, customer lists, unannounced business relationships, marketing plans, or personnel information.

The most important trade secrets are often only known by one or two employees in the company and are kept locked in a safe. For example, in a production process, portions of the product are prepared in separate areas so that nobody knows the entire formulation of the finished product.

Other protection includes:

  • Employee confidentiality agreements
  • Employee non-compete agreements
  • Customer and supplier non-disclosure agreements

Enforcement
The USPTO has an enforcement team.

The Enforcement Team’s mission is to improve intellectual property protection and enforcement domestically and abroad. Since the rights granted by a U.S. patent extend only throughout the territory of the United States and have no effect in a foreign country, an inventor who wishes patent protection in other countries must apply for a patent in each of the other countries or in regional patent offices. Almost every country has its own patent law, and a person desiring a patent in a particular country must make an application for patent in that country, in accordance with the requirements of that country.

To Report IP Theft Click HereIntellectual Property Rights Center

Related Links

IPR-Related Laws – Central America – The Secretariat for Central American Economic Integration (SIECA in Spanish), with funding from the USPTO, has consolidated and published the IPR-related laws of five Central American countries and the Dominican Republic.

Resources

 


Disclaimer: The information provided in this site is not legal advice, but general information on legal issues commonly encountered. FRESCO Services LLC is not a law firm, doesn’t provide legal advice or legal services, and is not a substitute for services of an attorney familiar with your situation.