Trade Secret protection is likely one of, if not the least well-known methods of intellectual property. However, if utilized properly, trade secret protections can not only protect intellectual property that is still being developed, but can even provide significant protection to valuable assets that do not fall within any of the other categories of intellectual property protection.
What are trade secrets?
While the exact definition can vary by jurisdiction, a trade secret is generally understood to be information that is made subject to reasonable efforts to be kept secret, and whose value comes principally from it being secret. At first glance, this definition would likely encompass things like customer lists, secret formulas, and even inventions that are still being developed.
How do you keep trade secrets protected?
The secret (pause for laughter) to keeping trade secrets protected is making sure that your efforts to keep them secret from your competitors are reasonable under the circumstances. Understandably, what constitutes “reasonable efforts” depends entirely on the surrounding circumstances, like the nature of the information being kept secret, the industry that the secret holder is participating in among others, and the relative ease of maintaining protective measures on the secret information, among others.
The fact that trade secret protection is wholly rooted within the requirement of taking minimum reasonable efforts presents a rather significant downside to what otherwise would be an incredibly powerful protection. I will discuss the effect of this shortcoming below.
What law governs Trade Secrets?
Traditionally, Trade secrets were governed by state common law and statutes, but as of 2016, the Defend Trade Secrets Act (“DTSA”) has placed Trade Secrets also within the realm of federal law. This is a trickier situation than others covered by both state and federal law because there is no express preemption over state law in the DTSA.
Additionally, the absence of any express preemption also indicates that it is unlikely that the supremacy clause would cause any preemption issues, because that would seemingly go against the intent of the act. This essentially means that jurisdiction and venue are very important for any plaintiff wanting to bring initiate any trade secret litigation.
What is Misappropriation?
Upon possessing a trade secret, the party owning the secret can sue others who “misappropriate” the secret in some way. Misappropriation generally means Acquiring using or otherwise disclosing the secret information without the secret-holder’s consent, and usually results in an injunction, but in certain other cases, can result in the awarding of money damages
What are some important problems with trade secrets?
While trade secret protections are certainly a powerful tool under the right set of circumstances, they can be nearly useless if the context in which they are used is not ideal. By this, I mean that there are certain situations in which trade secrets are simply not very effective. This could be for a number of reasons, whether it is because of technological development or simply the logistical issues surrounding keeping certain information secret. For example, while secret formulas were once a popular form information protected as a trade secret, relative ease with which an individual can discover the exact chemical makeup of any item means that any trade secret on a formula is not destined to last very long if the secret holder is gaining any substantial commercial value from it.
Another issue that is present with trade secrets is the fact that whether or not “reasonable measures” are taken to protect the information, if it is discovered, it is no longer a trade secret, and the secret holder then has nothing. This is not as much of an issue though, because it can be addressed in litigation, and calculated into the damages.
While issues such as these can prove problematic at times, their existence simply means that it is important for entrepreneurs to think about what they want protect as a trade secret and when they want to do so. For instance, processes and customer lists still lend themselves exceedingly well to the trade secret framework, remaining rather difficult to legitimately discover. Similarly, intellectual property that is being developed is another good choice for trade secret protection
That being said, trade secrets are very good for protecting inventions or products that are either in development, or are not as readily available to the general public through legitimate means.
Why are Non-Disclosure Agreements so important?
Non-Disclosure Agreements (“NDAs”) are an integral part of any entrepreneur’s arsenal if they wish to conduct serious research and development and use trade secret as a way of protecting their in-progress inventions. In essence NDAs legally bind employees to keep from discussing any inventions that they may be working on, and in-so doing showing the use of reasonable efforts to protect any secret information.
Conclusion/takeaways
While trade secrets are an easily gained, and occasionally effective solution for protecting intellectual property for many entrepreneurs, they are far from ideal in many situations requiring too much effort, or being practically impossible to realistically maintain. Because of this fact Entrepreneurs should give serious thought to what they wish to protect and when they wish to protect it, because it could mean wasted effort and the loss of any conceivable commercial advantage that could be gained through the use of trade secret protections.
SOURCES:
Trade Secrets 101: What Every Entrepreneur Should Know, by Chris Brown https://ithinkbigger.com/trade-secrets-101-every-entrepreneur-know/
Entrepreneurship and IP Part III: Trade secrets, By Lipika Sahoo
1st photo: commons.wikimedia.com
2nd photo: wix.com