A trade secret is any valuable business information that is not generally
known to your competitors and has been subject to reasonable efforts to preserve confidentiality.
The business information which constitutes a trade secret can include a formula, pattern, compilation, program, device, method, technique or process. The information must derive for its
owner independent economic value, actual or potential, while it is not known by your business competitors. It should not be
readily ascertainable through proper means by other persons, otherwise it can lose its trade secret status.
speaking, a trade secret will be protected from use by those who are not authorized by you to use the information. This means
they would have to obtain access through an improper means. This includes anyone who receives the information from a person
who they know or should have known gained access through improper means, or those who breach a promise to keep the information
Uniform Trade Secrets Act generally governs as the controlling law in this area. Virtually all states have adopted a portion
or modified version of the Uniform Trade Secrets Act. According to the text of the Uniform Trade Secrets Act, a "trade secret"
information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives
independent economic value, actual or potential, from no being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Use of a company’s trade secret which has been
obtained in an improper manner is known as “misappropriation”. Trade secret misappropriation can be thought of
as a type of unfair competition. According to the Uniform Trade Secrets Act, misappropriation is defined as:
(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was
acquired by improper means; or (ii) disclosure or use of a trade secret of another without express or implied consent by a
person who (A) used improper means to acquire knowledge of the trade secret; or (B) at the time of disclosure or use knew
or had reason to know that his knowledge of the trade secret was (I) derived from or through a person who has utilized improper
means to acquire it; (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use;
or (C) before a material change of his position, knew or had reason to know that it was a trade secret ad that knowledge of
it had been acquired by accident or mistake.
Improper means is defined in the Uniform Trade Secrets
Act to include "theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage
through electronic or other means."
Use of a trade secret without proper authorization is called
“infringement”. Remedies for infringement of a trade secret include damages, profits, reasonable royalties, and
an injunction. Damages can include both the actual loss caused by misappropriation and the unjust enrichment that is not taken
into account in computing actual loss. In lieu of damages measured by any other methods, the damages caused by misappropriation
may be measured by imposition of liability for a reasonable royalty for an unauthorized
disclosure or use of a trade secret. If willful and malicious misappropriation exists, the court may award exemplary “double”
With respect to injunctive relief the Uniform Trade Secrets Act provides that both an actual or threatened misappropriation
may be enjoined. This means that the court will step in and pre-empt a party from exploiting a trade secret. “Intention”
is enough basis to bring a law suit against a potential violator.
fees are also available under the Uniform Trade Secret Act if the misappropriation is willful and malicious. Some statutes
also provide for enhanced damages and attorneys fees in certain circumstances.
Unlike patents, trademarks and copyrights, there is never a registration or certificate which tells a third party that
a business is claiming information as a trade secret. The only certain way to determine if information is a trade secret is
to have a court rule. This uncertainty makes trade secrets often difficult to quantify. However, there are steps a business
owner can take to make it more likely that his proprietary information will be considered a trade secret.
To adequately protecting trade secrets is something businesses must practice routinely each
day. Your business should have a formal trade-secret protection program. This includes continuous monitoring to ensure the
procedures are being followed. The greater the effort a business puts into maintaining and monitoring its trade secret protection
program, the more likely that the business's trade secrets will be protected against misappropriation.
However, just because you have established
a trade-secrets protection program, and you monitor that program, this alone usually is not sufficient to have a court rule
to protect the company's allegedly secret information. A business's trade secret protection program should address all aspects
of control over the company's trade secrets and should particularly focus on the areas where such trade secrets may be disclosed
to employees, customers, vendors and contractors.
A thorough program includes business premises
security, control of confidential information on a need-to-know basis, nondisclosure agreements with third-parties including
customers, vendors and consultants. As well as written employment agreements that prevent disclosure of confidential information,
both during and after the period of employment.
We are happy to provide a fee-based consultation
to help you assess your current trade secret program, to prepare non-disclosure and employment agreements or to just answer
your individual questions on trade secret law. Simply select the “Contact Us” option on the left hand menu bar
to reach us and arrange an appointment to discuss your individual needs.