Created by FindLaw’s team of legal writers and editors | Last updated June 20, 2016
Trade secrets are confidential information that provide a business with a competitive edge over other businesses in the same industry. They are usually defined broadly, and can include anything from commercial secrets to manufacturing or industrial secrets. For example, the recipe for Coca-Cola is probably one of the most famous and well-kept trade secrets. Theft of a trade secret occurs when a person uses confidential business information without authorization. Depending on the laws of a particular jurisdiction, trade secrets can be protected by intellectual property or unfair competition laws.
Defining Trade Secrets
The definition of a trade secret will vary from jurisdiction to jurisdiction, but there are a few common elements among the definitions. In the United States, trade secrets are generally defined as information that a company takes reasonable measures to protect because it confers an economic value to the company by not being disclosed to the general public. In order to qualify as a trade secret, the information must not be generally known or reasonably ascertainable by others.
Trade secrets can include advertising strategies, sales methods, and manufacturing processes. They also can be industry-specific, such as a company’s food or drink recipe. The determination as to whether or not something is a trade secret generally is determined on a case-by-case basis.
Trade Secrets vs. Patents
Trade secrets can include information that meets the eligibility requirements for patent protection and information that doesn’t. Even if your trade secrets meet the criteria for patentability, you still have the option to keep the information as a trade secret. There are advantages and disadvantages to keeping information as a trade secret instead of seeking patent protection.
First, it’s important to realize that patent protection has a time limit, while trade secrets do not (as long as no one reveals the information to the public). In addition, trade secret protection doesn’t require compliance with any specific formalities. Patents, on the other hand, must be registered with the United States Patent and Trademark Office (USPTO) in order to receive protection.
There are also disadvantages to keeping an invention as a trade secret instead of applying for patent protection. First of all, depending on the type of trade secret it is, people can reverse-engineer it — inspect, dissect, and analyze it — and discover the secrets and legally use them for their own commercial gain. In addition, trade secret protection is much more difficult to enforce than a patent, and if someone else is able to figure out your trade secret by legitimate means, he or she can patent it.
Ways to Protect Against the Theft of Trade Secrets
It’s very important to take certain precautions to protect your company’s trade secrets. First, as explained above, you should see if your trade secret is eligible for patent protection and, if it is, weigh the advantages and disadvantages of having a patent. It’s also important to make sure that only a limited number of people know the secret, and that those people know that the information is confidential.
Confidentiality agreements are a good way to make people aware of the fact that there is information that should not be shared, and would give your company a breach of contract claim if the trade secrets are disclosed to others. It’s a good idea to not only have employees sign confidentiality or nondisclosure agreements, but also have business partners privy to confidential information to sign such agreements as well.
Getting Legal Help
A theft of trade secrets can have devastating affects on your business. It can also feel like a personal betrayal. If you believe that your trade secrets have been stolen, or if your business has been accused of doing so, it’s in your best interests to contact a local business and commercial attorney for guidance.
For more information and resources related to this topic, you can visit FindLaw’s Business Torts section.
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