TRADE SECRETS SERVICES

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Trade secret law is state law. Most all states have unfair competition laws that prevent the “misappropriation” of “trade secrets”. Though trade secrets evolved from the common law, a majority of states, have now adopted the Uniform Trade Secrets Act.

Generally, a “trade secret” is defined as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) [d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy that is the subject of reasonable efforts to preserve confidentiality that has value because it is not generally known in the trade.”

The owner must take reasonable efforts to maintain confidentiality of the information at issue to preserve the owner’s trade secret rights in such information. This requirement forces a choice between patent protection and trade secret protection, as patents become published documents which are no longer secret. True secrecy imposes a substantial burden, and companies often invest heavily in keeping their secrets through confidentiality agreements, data safeguards and other security measures. Many technologies are incorporated in products that can be taken apart and reverse engineered. Such technologies are poor candidates for trade secret protection. Industrial processes are usually better candidates.

State and/or common law rights protect trade secret holders in the event such trade secrets are improperly disseminated.

Trade secrets may be protected as such indefinitely as long as secrecy is maintained.

Since trade secrets are maintained by their respective owners, there are no filing costs associated with protecting a trade secret. However, the owner of a trade secret must be sure that every disclosure of the trade secret is done in a manner that maintains the confidentiality of the matter at issue. For example, non-disclosure agreements should always be executed before a trade secret holder discloses the trade secret to a potential business partner.

A classic example of a trade secret is the formula for Coca Cola® which is code named “Merchandise 7X”. It’s known to only a few people and kept in the vault of a bank in Atlanta, Georgia. Everyone who knows the formula has signed a non-disclosure agreement, and it is rumored that they are not allowed to travel together. Coke is famous for some of the most aggressive employee, vendor, and distributor NDAs in the world, and has filed many trade secret lawsuits over the years. One employee was convicted in 2007 of offering samples of a new Coca-Cola product to Pepsi for $1.5 million.

A good trade secret can last forever as long as it is possible to keep it a secret. You can lose it in a heartbeat if you can’t keep it secret. Make it a conscious business decision, and think of Wally Amos who made the wrong decision with his Famous Amos® chocolate chip cookie recipe.