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A Brief Explanation of Trade Secrets

Posted by Isabel Fox | Feb 29, 2024 | 0 Comments

Unlike patents and trademarks, trade secrets are not as widely well known or understood. However, trade secrets are an essential type of intellectual property, and it is vital to learn how to take appropriate measures to keep trade secret information confidential.

What are Trade Secrets?

Trade secrets provide intellectual property rights for confidential information. The subject of the trade secret should not be known by the public, should have value to competitors, and reasonable steps must be taken to maintain secrecy to keep the trade secret's independent economic value. A trade secret protects information such as client lists, sales techniques, manufacturing processes, and many more.

One famous example of a trade secret is the Coca-Cola® formula. Created in 1886, the Coca-Cola® formula has been a closely-guarded trade secret. One of many reasons the formula has remained confidential for so many years is that it has been shared with a limited number of people, and appropriate measures have been taken to maintain secrecy, including the use of confidentiality agreements.

How to Protect a Trade Secret?

Trade secret information is only effective if it remains a secret, so taking appropriate measures to maintain secrecy is critical. A few steps that can be taken include:

·      Non-disclosure and non-compete agreements

o   A non-disclosure agreement (NDA) should be signed by employees as well as business partners to prevent them from disclosing any company's trade secret information.

o   A Non-compete agreement (NCA) should be signed by employees and contractors to prevent them from working with the company's direct competitors for a certain amount of time.

·       Controlled access to information

o   Be aware of the information that is being disclosed to others. Let the employees and partners know what information is trade secret and how to maintain secrecy without compromising the information.

o   Only provide access to limited people and restrict access to those who do not need to know the trade secret.

·      Strong electronic protection measures

o   If trade secret information is stored in a computer, frequent security measures need to be taken, such as using security systems or password-protected servers.

o    Encrypt highly sensitive files if possible. 

Trade Secrets and U.S. Law

The United States government has established a few legal avenues in response to misappropriation or theft of trade secrets. For example, the Uniform Trade Secrets Act (USTA) was created by the Uniform Law Commission in 1979 and has since been enacted by 48 states and the District of Columbia (New York and North Carolina have not yet enacted the USTA). The USTA is a model act, that upon adoption under relevant State law, provides remedies for trade secret misappropriation under State law. 

In addition, the Theft of Trade Secrets Clarification Act of 2012 provides Federal fines, penalties, and remedies against trade secret offenders.  This Act also expands the scope of the Economic Espionage Act of 1996 to cover products or services actually used in interstate or foreign commerce or “intended for use” in interstate or foreign commerce. 

Trade Secrets vs. Patents

Trade secrets and patents overlap in some ways but are also different. Trade secrets can theoretically last indefinitely, but only if secrecy is adequately maintained. As soon as the information is known by others who are not under confidentiality agreements, the information is not considered a trade secret. On the other hand, patents become public knowledge upon publication and have a limited 20-year term from the time of filing. After that period, any information included in a patent will be in the public domain. It should be noted that a single invention can include elements under patent protection while other elements of that invention are maintained as trade secrets. To get patent protection, patents need to be examined and issued by the USPTO. There is no formal registration process for trade secrets, but maintaining the secret is an ongoing endeavor that takes much care and attention.

How Gallium Law Can Help

Many inventions are eligible for several types of IP protection. For example, some ideas and processes that are good candidates for trade secrets may also be patentable ideas. The IP professionals at Gallium Law would be happy to discuss your idea and the merits of pursuing patent, copyright, and/or trademark protection vs. maintaining a trade secret. Please fill out this Contact Form or call us at 651-256-9480 to schedule a meeting.

*The information provided in this article is not legal advice and should not be relied on as such. The content of this article is for informational purposes only and is meant as a starting point in your search for answers to your legal questions.

 

 

 

About the Author

Isabel Fox

Isabel Fox is a registered patent agent and has been with Gallium Law since 2018. Her practice largely revolves around utility and design patent prosecution; including conducting patent landscape searches, drafting patent applications, and responding to Office Actions issued by the USPTO...

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