A trade secret is any sort of business or technological information not generally known that provides a company or other business entity with a competitive advantage or from which the company derives some economic benefit. Trade secrets are not registered, unlike copyrights and trademarks, nor is there a process for protecting trade secrets that is similar to the patent process. Instead, trade secrets are protected under state law. Although trade secret law was originally based in common law, several states have enacted trade secret statutes.
Because neither federal nor state law provides for registration of trade secrets or issuance of trade secret protection, the only way to protect a trade secret is by taking reasonable means under the circumstances to keep the trade secret unknown to others. Although it is obvious that a company desiring to maintain the protection of a trade secret must avoid its public disclosure, that in itself is not generally sufficient; rather, some positive protective action must be taken to keep the trade secret from becoming generally known. In general, the extent to which such measures are taken will be considered in determining whether it is legally protectable.
There are several factors that are considered in determining whether a particular piece of information is protectable under trade secret law. As its name suggests, to be a trade secret, information cannot be widely known; however, a certain number of people within a company can know the trade secret without its losing eligibility for protection as long as the information is not known outside of the company. Another consideration is the value of the information to the owner, including how much time and money was expended to acquire the information. A related consideration is the cost to another company that would be required to acquire the same information.
Several different measures can be taken to increase the chance that a court will find a trade secret protectable. A business seeking to protect a trade secret might confine the knowledge of the secret to a small department in which the secret is applied or is otherwise used. The employees who need to know the secret might be compelled to sign non-disclosure agreements as a condition of their continued employment. Such agreements are special contracts between the employee and the business and are usually enforceable in court. Another effective measure would be to restrict access to the building or area of a building in which a secret is kept to personnel who are authorized to know the secret. A company that must reveal a trade secret for legitimate business purposes, for example, to another entity with which it does business, might require the other company to sign a non-disclosure agreement as a condition of doing business with the company.
If a court finds that a company has taken sufficient steps to maintain its trade secret, but the trade secret is obtained by another person or entity by theft or some other improper means, including disclosure in violation of a non-disclosure agreement, the trade secret owner will be able to obtain a court order to enjoin the use of the trade secret as well as further disclosure of the trade secret. The trade secret owner may also be able to recovery monetary damages from the person or entity that misappropriates the trade secret if the trade secret owner experiences economic loss from the misappropriation.
Trade secret law protects valid trade secrets from being appropriated through invalid means. It does not prevent a company from obtaining a trade secret that another company already owns through research or investigation. It is not illegal under trade secret law to take a validly obtained product of the trade secret owner and disassemble or otherwise analyze the product to determine how it works and how it is made, a process known as reverse engineering. If a trade secret might be easily obtained by others through such valid means, the trade secret owner might wish to seek patent protection or other type of protection available for intellectual property. Although the patenting process, if successful, will result in the public disclosure of the trade secret and the destruction of trade secret protection, a patent application is subject to trade secret protection until such time as a patent issues. If the trade secret is not eligible for a patent, it will therefore remain a trade secret as long as measures for continuing its protection are maintained.