Trade Secret – What Exactly Is a Trade Secret?

Invariably someone new to the considerations of intellectual property will ask - "What exactly is a trade secret"

Trade secrets are sometimes described as an alternative to patents for protecting an invention --- but only for some inventions, and only if the owners take certain actions. Inaccurate or out-of-date “folklore” about trade secrets is widespread. We can advise you on whether your invention could be defensible as a trade secret and what protective measures to take. So yes, there are some "Myths" about trade secrets:

“Trade secrets are free. Just don’t publish, or try to patent, the invention.”

Not true. An invention that is not published or filed with the Patent Office doesn’t automatically become a court-enforceable trade secret. The following eligibility requirements also need to be met:

1.     It’s not already public knowledge.

2.     It’s possible to keep secret.

3.     It’s used in business to provide a product or service that is commercially sold.

4.     The owner benefits economically from the secrecy.

5.     The owner takes commercially reasonable measures to safeguard the secret.

“If your trade secret is leaked, a court will award you compensation.”

Not always true. Among other things, it depends on how the leak happens. Your defendant has to have accessed the trade secret by some kind of wrongdoing. “Wrongdoing” includes illegal acts, such as burglary, extortion, or industrial espionage. It may also include breaches of confidentiality, non-compete, or work-for-hire clauses in contracts, although states differ as to the types of contracts they enforce. However, someone who independently

In some circumstances, trade secrets may be used or exposed without wrongdoing. If someone independently happens to conceive the same idea, they have done no wrong. If their conception is truly independent, a court won’t order them to compensate you for the loss of the trade secret. However, if there are suspicious circumstances, such as a connection with someone who previously learned the trade secret from you, their conception may not have been truly independent, and you may be entitled to compensation.

Not exactly true: “Trade secrets never expire.”

Trade secrets don’t have fixed expiration dates. They are enforceable as long as they meet all the legal requirements for a trade secret. However, they effectively “expire” when they are exposed to the public, whether intentionally or accidentally.

Not true anymore: “Trade secrets are only protected in state courts, and the laws vary a lot between states.”    

In 2016, the federal Defend Trade Secrets Act gave trade secret owners the right to sue defenders in federal court. State courts are also available and may be more convenient if there aren’t any interstate issues. Now that almost all the states have adopted some form of the Trade Secret Act, the variation between states has been reduced.

Why choose an attorney who knows both patents and trade secrets?

When you need to decide whether to protect an invention as a patent or a trade secret, it’s best to consult an attorney who’s familiar with both and can make recommendations that fit your business strategy. We can advise you on how to set up and maintain a trade secret policy for your company, and how to decide which inventions could become valuable trade secrets.

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