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.

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.

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