Trade Secrets - Explained
What are Trade Secrets?
Written by Jason Gordon
Updated at April 8th, 2023
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What are trade secrets?
A trade secret is a form of intellectual property specific to individuals or businesses involved in a trade or industry. More specifically, it is any form of knowledge or information that:
- has economic value from not being generally known to, or readily ascertainable by proper means by, others; and
- has been the subject of reasonable efforts by the owner to maintain secrecy.
Trade secrets may include a broad range of company information, such as project or strategic plans, operational methods, customer lists, designs, and research and development.
Next Article: Overview of Patents Back to: INTELLECTUAL PROPERTY LAW
What Does Trade Secret Law Come From?
Trade secrets are protected under common law and many states have adopted forms of the Uniform Trademark Secrets Act (UTSA). Both provide causes of action against individuals who misappropriate the information kept as a trade secret. The theory behind liability is that an individual who misappropriates the information breaches a duty of loyalty owed to the owner. Trade secret rights never expire, unless the information loses economic value or is no longer kept secret by the company.
Note: Competitors may legally assemble, reverse-engineer, or otherwise uncover information subject to a trade secret. The sole limitation is that a competitor cannot misappropriate the information from the holder of the trade secret.
Example: A trade secret could be a recipe, customer list, or strategy for carrying out a process. If Cheap-Cola reverse-engineers the Coca-Cola formula, it is free to use the trade secret in commerce without violating Coca-Colas rights. If, however, Cheap-Cola pays a Coca-Cola employee for the secret recipe, it would violate Coca-Colas rights to sell a product employing that recipe.
Discussion Question
How do you feel about the idea that a company's private information cannot be taken and used by others? How do you think these types of protections affect industry competition? Can you think of any companies that successfully use trade secret rights in selling a product?
Practice Question
Jim works for Sweet Melissa's Barbecue Sauce Company as a taste engineer. He works with combinations of spices to make the Sweet Melissa sauce line tasty. He is considering leaving the company to start his own sauce line. He developed several sauces for Sweet Melissa that he knows are not patented. He believes that he can take these recipes and develop a successful product line. Does Jim potentially face liability if he uses the recipes he developed when working for Sweet Melissa's?
Related Topics
- Intellectual Property Law (Intro)
- What is Intellectual Property?
- What is the purpose in granting intellectual property rights?
- What is required to capture or secure intellectual property rights?
- California Labor Code 2870
- What are Trade Secrets?
- Non-Disclosure Agreement
- Patents or patent rights?
- Letters Patent
- Primary types of patents?
- What Can I Patent?
- Requirements for a valid patent?
- Can your Invention be Patented?
- What is a Patentability Search?
- When is a Patentability Search Necessary?
- Why is a Patent Search Important?
- Requirements for a design patent?
- How to Do a Design Patent Search
- Cost of a Design Patent
- Requirements for a utility patent?
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- Plant Patent?
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- Patent Search
- Basics of Doing a Patent Search
- 5 Rules for Effective Patent Searches
- What are Patent Databases?
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- What is a Trademark?
- Types of trademark?
- Requirements to capture trademark rights?
- Distinctiveness requirement for a Trademark?
- Determining whether a trademark is sufficient distinctive?
- What is Federal Trademark Registration?
- Conducting Trademark Search
- Should I Conduct a Trademark Search?
- Trademark Application
- Drawing a Trademark
- Filing for federal trademark registration?
- Protections of trademark rights under state law?
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- Trademark infringement?
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What is a copyright?
- Digital Millennium Copyright Act or DMCA Explained
- Basics of Copyright Law
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- What are infringement and the process for enforcing a copyright?
- What are the defenses available against a claim of copyright infringement?
- Public Domain Works
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- End User License Agreement
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- What international protections exist for intellectual property rights?
- Paris Convention
