Trade secrets are formulas, designs, practices, processes, or patterns that are not widely known or cannot be reasonably ascertained. Trade secrets usually consist of information that confers some type of monetary benefit on the holder of the trade secret. Efforts are made to keep trade secrets private. Some examples of trade secrets are the formula of Coca-Cola and designs for manufacturing radio parts.
Trade secrets can usually be protected without registration or other formalities. However, in order to be protected, the information must be secret, it must have commercial value, and the holder of the information must have taken steps to keep it private. Trade secret owners must take explicit steps to protect their trade secrets. In absence of reasonable steps to protect the trade secret, in case of involuntary disclosure, theft, or a challenge, a court may hold it not to be a secret at all and the owner may lose its right to the trade secret. If your business has a trade secret, you should also consider whether the secret can actually be patented. If it can be, you should consult with an attorney on whether it could be better protected by a patent.
You should make sure that only a few people know about the secret and that they know it’s confidential. Use confidentiality agreements with both your employees and your business partners. In general, trade secrets are protected under state laws rather than federal laws. Most states have adopted the Uniform Trade Secrets Act, which protects trade secrets that have not been disclosed.
There are many ways that companies try to discover the trade secrets of their competitors. They may use reverse engineering, which is to discover how something operates by analyzing its structure and functions. Reverse engineering, which generally entails taking something apart so its inner workings can be analyzed, is legal.
Another mechanism employed by businesses to try to discover trade secrets is through industrial espionage. Industrial espionage can include breaking into a company’s operations, hacking into the computers of a competitor, setting up wiretaps or planting hidden bugs, or other illegal means of obtaining a competitor’s secrets. The Economic Espionage Act makes it illegal to steal trade secrets to benefit foreign countries. The Economic Espionage Act also makes it illegal to steal trade secrets for commercial or economic purposes.
If a trade secret is stolen, the thief may be held liable for the taking. The company whose trade secrets were stolen could obtain an injunction ordering the thief to stop using the trade secret. The company could also get an award of damages for all profits the thief made by using the trade secret.
Attorney Kumar has held the position of Chief Operating Officer of a publicly traded company where he was responsible for the company’s strategy for expanding and protecting its intellectual property including trade secrets. If your business uses trade secrets, you should contact our firm to help protect those trade secrets. In some instances, the trade secret should be patented. You should utilize confidentiality agreements in your partners, suppliers, and customer engagements and ensure that adequate security procedures are in place.