Trade Secrets

A “trade secret” is any confidential business information which provides a competitive edge. This is a broad definition on purpose! Trade secrets can include many things that protect or help your business, including:

  • computer algorithms
  • the formula for an energy drink
  • lists of suppliers and clients
  • sales or distribution methods
  • consumer profiles
  • advertising strategies
  • high-altitude recipes for cupcakes
  • manufacturing processes
  • employee training methods or manuals

Unlike other forms of intellectual property, such as patents, copyrights, and trademarks, you do not register with the government to secure your full legal rights to your trade secrets. Instead, trade secret law requires a “DIY” approach – you need to have the legal knowledge and employ certain protection strategies on your own.

Trade Secret Misappropriation

A determination of what information constitutes a trade secret will depend on the circumstances of each individual case, but the unauthorized use of such information by persons other than the trade secret holder is regarded as an unfair practice and a violation of the trade secret.

The primary way to protect your trade secrets is to keep the information secret!

Trade secret protection lasts for as long as the information is kept confidential. However, once a trade secret is made available to the public, trade secret protection ends. Thus, it can be critical for a small business owner or enterprise to proactively monitor its use and disclosure of trade secrets, and take the appropriate legal steps of they think this information has been improperly shared by someone.

Trade Secret Laws

Holders of trade secrets are usually advised to use legal contracts to enforce the important obligation to keep their information under wraps. These can be signed by employees, vendors, business partners, and any other third party who might receive or be privy to the trade secrets. Non-Disclosure Agreements or Confidentiality Agreements are the common names of these types of standalone contracts, but these types of legal provisions can show up in a wide variety of business contracts and documents.

Until recently, trade secret misappropriation was mostly a matter of state law and, in many cases, those seeking relief from trade secret misappropriation were limited to state courts. In 2016 however, Congress passed the Defend Trade Secrets Act (the DTSA), creating a federal private right of action for trade secret misappropriation that can be brought in state and federal courts. It leaves state trade secret laws undisturbed, while providing for a nationally uniform cause of action.

Trade secret misappropriation issues may also become a criminal matter. The FBI estimates billions of U.S. dollars are lost to foreign competitors every year, who deliberately target economic intelligence in advanced technologies and flourishing U.S. industries.

If you have questions about trade secret law, how to implement company policies to maximize trade secret protection, or need guidance if you think someone is misappropriating your trade secrets, contact our Intellectual Property team today.