What is a Trade Secret?

                A trade secret is a creature of statute.  They exist because state legislatures have defined them and deemed them worthy of protection.  Trade secrets are created and maintained when companies, sometimes unknowingly, follow the provisions of the statute.

                 At the most basic level, trade secrets are information that has value because the information is not commonly known and is treated as a secret.  Information such as client lists, internal processes, and secret recipes may be trade secrets.  If a trade secret is stolen, the owner of the trade secret may receive damages by way of monetary compensation.  However, the difficult part in proving theft of a trade secret is often not proving that the information was taken, but proving that the information was indeed a secret.  Following simple steps and integrating them into company policy may help to ensure that information is properly protected as a trade secret.  Taking simple steps such as marking sensitive document “CONFIDENTIAL” or “PROPRIETARY” and storing these documents under lock and key may assist in proving that the information contained in the documents constitutes trade secrets.

                 Some types of intellectual property naturally lend themselves to trade secret status while others may be more effectively protected with a patent.  For example, intellectual property that must be made available to the public in order for it to be useful, such as a design for a better mousetrap, may provide no value to the owner if it is kept a secret and is therefore more suitable to patent protection.  Other information, such as the process that a company uses to determine how much to charge for its products, may not be easily determined by outsiders while still providing substantial value to its owners and is therefore well suited to trade secret protection.  Keeping information as a trade secret rather than seeking patent protection may allow the owner of the information to have exclusive access to the information indefinitely, while those who protect information with a patent must relinquish exclusive right to the patented subject matter at the expiration of the patent term.  On the other hand, if Company B obtains the information contained in a trade secret owned by Company A, Company A may not prevent the Company B from using that information, provided it was legitimately obtained.  However, if Company A holds a patent, Company B may not make use of the patented subject matter without Company A’s permission, regardless of how it was obtained and so long as Company A’s patent is still in force.  The decision as to whether to protect information with a patent or as a trade secret is fact specific and depends largely on the objectives of the owner of the information and the type of information that is to be protected.

                 Trade secrets may be an important asset in any intellectual property portfolio.  By following the requirements dictated by the relevant statute, businesses can create significant value in their proprietary information.

 

Kelly G. Swartz is an intellectual property attorney located in Melbourne, Florida.  Her practice, Ingenuity Law, focuses on patent, trademark, copyright, and trade secret matters.