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Liandra Izquierdo May 6, 2022 1:40:48 PM 7 min read

What Is A Trade Secret?

As a business owner, you have a right to protect your proprietary and confidential information.  

“Intellectual Property” (“IP”) is an amorphous area of the law built to protect inventions or creations. The subsections of IP include trademarks, patents, copyrights, and trade secrets. Each subsection focuses on a different type of asset and allows business owners to earn recognition or financial benefits from the applicable asset.  

What is a trade secret? 

A trade secret are confidential and economically advantageous business assets. Generally, trade secrets refer to any secret process, pattern, method, or practice belonging to a company. Trade secrets provide competitive advantages for companies by providing a “specialty” value to a business’ products or processes.  

While a trade secret can be anything from a formula to a recipe, all trade secrets share the following characteristics:  

  1. not public information; 
  1. provide an economic benefit to the holder; and 
  1. secrecy is actively protected.  

The more economic and competitive value provided by a trade secret, the more protection a holder will be given under the law.  

What can I use as a trade secret? 

Unlike other areas of intellectual property, such as trademarks or patents, trade secret protection is a broad umbrella that encompasses a wide range of information.  

Due to the minimum requirement of maintaining “secrecy,” trade secret protection can apply to both tangible and intangible information regardless of how it is stored or maintained. This means a trade secret does not have to be physically written down – a trade secret can be broken up and memorized!  

Patentable Information that May be Subject to Trade Secret Protection: 

  • Technical schematics 
  • Invention prototypes 
  • Other scientific information  
  • Engineering schematics 
  • Program devices  

Copyrightable Information that May be Subject to Trade Secret Protection:  

  • Written business outlines 
  • Programs 
  • Codes  
  • Compilations  
  • Patterns 

Trademarkable Information the May be Subject to Trade Secret Protection: 

  • Designs  

Other Information Subject to trade Secret Protection: 

  • Formulas 
  • Recipes  
  • Methods 
  • Techniques 
  • Procedures  
  • Names of suppliers  
  • Customer lists  

How do trade secrets work? 

To be legally considered a trade secret, businesses must take reasonable efforts to conceal the information from the public. Trade secrets, necessarily, must remain a SECRET to be actionable under the law. Once actionable, trade secret protection allows businesses to defend themselves against unfair competition, commercial espionage, and unfair business practices within their given industry in perpetuity.   

Trade secret protections only expire when the information no longer remains a secret. Therefore, failure to protect a trade secret will result in the loss of legal protections. These protections may be lost when: 

  1. A trade secret holder fails to maintain the secrecy of the information. 
  1. The information is independently discovered. 
  1. The information is accidentally released. 
  1. The information becomes general knowledge; or 
  1. The information is reverse engineered.  

On a day-to-day basis, secret and confidential information may be accessed by a number of people including business partners and employees. As a result, business owners must be proactive when ensuring their practices remain secret and confidential. 

At the advice of legal counsel, businesses should take preventive measures to protect trade secrets against theft or misappropriation. Contractual obligations, such as non-disclosure agreements and non-compete agreements, are common ways for businesses to ensure that confidential information is prevented from being shared or used in competition with the owner. Technological infrastructures, such as robust security or controlled access, can also provide additional barriers from the accidental or purposeful leak of confidential information.  

While these protection methods may seem daunting, they only need to be reasonable and are worth the protection of any confidential and economically advantageous business assets.  

If trade secret protections are limited to information that remains confidential and difficult to maintain, why would I pursue a trade secret instead of a patent? 

Trade secret protection provides several advantages over patent protections.  

First, trade secret protection is potentially perpetual. As long as the information remains confidential, the trade secret is protected, whereas patent protections last for only 20 years from the filing date of a patent application. 

Furthermore, trade secret protection does not require any maintenance fees outside of the fees associated with keeping your information confidential. Meanwhile, patent applications require all the costs associated with preparing and filing a patent application and the costs associated with maintaining a utility patent. These patent maintenance fees range from a few hundred dollars to thousands of dollars depending on the size of the business.  

Finally, patents are public. Patent applications require the full disclosure of everything known about you invention, including how to make and to use your invention. Which means, from the point of filing, anyone in the public can look at your patent, improve upon it, and file a new application using your technology as its basis. Trade secrets avoid these unfair business practices by necessarily maintaining all aspects of your invention confidential for the duration of the protections.  

If your invention, process, or procedure will not be public or entered into public commerce, it may be beneficial to explore trade secret protections to prevent the replication of your inventions, processes, or procedures.  

 

Trade Secrets 

Patents 

Duration 

Perpetual, so long as secret 

20 years 

Fees 

  • Those associated with maintain secret 
  • USPTO application fees 
  • Maintenance Fees 

Publicity 

  • No 
  • Yes 

Protections 

  • Complete information from misappropriation 
  • Right to exclude others  

When Protections Begin 

  • Immediately 
  • Upon filing  

 

Where do I start? 

Before pursuing trade secret protections, business owners must take special care to ensure that the information is, in fact, a secret. Only proprietary and confidential information may be subject to trade secret protections. As such, it is important to consult a licensed attorney to create a comprehensive and proactive plan to protect your business’ assets.  

Reach out to us if you are interested in learning more about trade secrets, pursuing strategic advice, and drafting any necessary documents to ensure your assets remain protected.