Intellectual Property

TRADE

SECRETS

What is a Trade Secret?

A trade secret is information or know-how that has economic value from not being known to or readily ascertainable by those who could gain value from its use or disclosure, and which is the subject of reasonable security measures. Trade secrets differ from other forms of intellectual property protection in that it does not give its owners legal protection to disclose it, but instead gives them a course of action against those who wrongfully access their information. 

Examples of Trade Secrets include:

  • customer lists

  • manufacturing methods

  • chemical processes

  • formulas

  • computer code

  • marketing data and strategies

  • designs and blueprints for machines

  • genetic information

  • data gained from surveys

Often, businesses must decide between trade secret protection and other forms of intellectual property, such as patent or copyright. While patent and copyright protection gives the owner EXCLUSIVE rights to use the the invention or work, they require disclosure, and do not last forever. Patents, specifically, require disclosing the subject matter to the world, and in return, the inventor gets to control how and when their invention is used...for generally 20 years. For technologies such as software where the lifecycles are extremely fast, 20 years might be more than enough time to fully exploit their software. For other companies, such as soda producers (i.e., Coca-Cola), trade secret protection can provide financial opportunities that last perpetually.

 

In some situations, the subject matter of a trade secret may not be patentable at all, either because they would not be patent eligible or because the statutory period for filing an application to patent has passed. This may also be the case for a company that is not fully ready to exploit the technology, so instead of obtaining a patent and starting the clock before things such as supply chains are in place, they can maintain their inventions in secrecy until the time is right. 

 

Finally, trade secret protection may be a more cost-effective or practical means of protecting proprietary information. Other than the cost of maintaining "reasonable measures" to keep the information secret, there are no filing fees, maintenance fees, or the like. The trade secret exists as long as it remains a secret. 

Whatever the reason for availing itself of trade secret laws, a company must use "reasonable measures" to keep the information secret. What measures would be considered "reasonable" vary based on things like industry practices and the value of the information, among other things. This is where legal counsel can play a vital role in evaluating current practices and recommending additional safeguards as necessary to maintain the actual secrecy of a trade secret.

Trade Secret Assessment

We view trade secret protection as an additional intellectual property tool at the disposal of our innovative clients. We work with our clients to determine their best course of action to protect and profit from their proprietary endeavors, whether that be through "traditional" intellectual property regimes such as patent, copyright, and trademark, or through policies, contracts, and procedures that keep a trade secret  legally secret. 

Misappropriation Analysis

Trade secret protection does apply directly to the subject matter that is the "secret," instead it protects trade secret owners from misappropriation of their secrets. If a third party independently arrived or even reverse engineered a trade secret of a company, there is not liability, and therefore no protection, unless they did so by using illegal means or by using their own access to the trade secrets inappropriately. While corporate espionage is one possible means for misappropriation, the most common scenario is with departing employees or contractors who had access to the information. To protect from these "internal" threats, non-disclosure agreements should be used which clearly identify the subject matter of the trade secrets and place reasonable limitations on the permitted dissemination of the subject matter of the trade secret. NOLI IP SOLUTIONS has both the legal and business experience to foresee the potential risks associated with employee mobility and the gaps in containment programs. Each industry is different regarding the exposure to trade secrets, the ability to transfer the trade secrets from one business to another, as well as the likelihood of employees to spin off on their own, and a proper analysis of the legal and business risks is necessary in the early stages of development and employee onboarding to ensure a business' secrets remain secret.

Trade Secret Enforcement

In the event of a misappropriation of trade secrets, enforcement may be necessary to maintain the legal secrecy of the subject matter. In order to maintain an internal secret when an employee, investor, or business affiliate works outside the company, clear policies and agreements must be in place. If those agreements are not upheld, then taking legal action can limit exposure and halt any disclosure that may destroy the secret.

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