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Trade secrets are a vital part of the intellectual property arsenal. Any information that derives independent economic value from not being generally known or readily ascertainable can be trade secrets, such as manufacturing methods, business lists, pricing information, confidential data, compilations, software programs, formulas, know-how, and any other type of information that can be used in your business without being disclosed.
Unlike other forms of IP, no registration or application needs to be filed for effective trade secret protection. To the contrary, publication of a trade secret to any third party who is under no obligation to maintain the confidentiality of the information destroys its confidential nature and therefore eliminates effective protection if the third-party disclosure is discovered in litigation.
In determining whether something is a trade secret, some of the factors a Court may look at are:
- the extent to which the information is known outside the business;
- the extent to which it is known to those inside the business, i.e., by the employees;
- the precautions taken by the holder of the trade secret to guard the secrecy of the information;
- the savings effected and the value to the holder in having the information as against competitors;
- the amount of effort or money expended in obtaining and developing the information; and
- the amount of time and expense it would take for others to acquire and duplicate the information.
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It is therefore important in making sure that trade secrets maintained in a business are kept confidential by the employees of the business who have either developed the trade secret information or who have had such information disclosed to the, preferably on a need to know basis. In this regard, it is important that the employees who generate or receive such confidential have signed non-disclosure agreements in place, potentially as part of their employment agreements.
Today, every state recognizes some kind of trade secret protection. Many states have legislation in place. In sharp contrast to patents, copyrights and trademarks, which are all Federal-based forms of intellectual property, trade secret protection originates and is primarily maintained through state and common law. There is no federal civil cause of action for trade secret infringement although trade secret misappropriation can violate Federal criminal law.
Sometimes choices must be made whether to maintain something as a trade secret or patent it. While such a decision must be carefully evaluated with your intellectual property lawyers, some of the factors that can be considered are the commercial value of the trade secret, the viable life of the trade secret (e.g., how easily can the trade secret be reverse engineered or independently discovered), its patentability, and its likelihood of having improvements or follow on developments that can be maintained as trade secrets.
One of the weaknesses of trade secret protection in contrast to a patent is that it does not protect against subsequent independent development of the same subject matter by a competitor. Of course, one of its strengths is that a trade secret need never expire. For example, the formula for Coca-Cola has been a trade secret for nearly 100 years, and will continue to be a trade secret until the formula has been reverse engineered or otherwise disclosed.
DISCLAIMER
Every case is unique and requires an experienced attorney to address your particular situation. Please do not consider any of the information provided here to replace a personal consultation with an experienced IP lawyer.
Please contact our Long Beach, California Smith & Garg office to see how we can assist you in pursuing your intellectual property law goals.
Call Smith & Garg, LLC today at 1-877-517-4275 or complete our Contact Form and let us assist you with your intellectual property needs. |