Trade secrets are a crucial but often misunderstood form of intellectual property protection. As a business owner or entrepreneur, it’s essential to understand what trade secrets are, how they’re protected, and why they matter.
A trade secret is confidential business information that provides a company with a competitive edge. A trade secret is not a single or one-off piece of information, instead it is a process or device for continuous use in the operation of the business. Unlike patents or trademarks, trade secrets are protected without registration, potentially indefinitely, as long as they remain secret.
There are several key characteristics of trade secrets. First, their value comes from being generally unknown to others. Unlike patents, trade secrets do not need to be novel or even have intrinsic value to be protectable as long as they are a secret. Second, the trade secret is only known to a limited group of people. Though total or absolute secrecy is not required, those to whom the secret is communicated must agree to keep the secret. Finally, the rightful holder of the trade secret must take reasonable measures to keep the trade secret a secret. A substantial element of secrecy must exist which means that unless someone used improper means, the trade secret would be difficult to acquire.
A six-factor test is commonly used by the courts to determine if the information is a trade secret:
- the extent to which the information is known outside of the business;
- the extent to which it is known by employees and others involved in the business;
- the extent of measures taken by the business to guard the secrecy of the information;
- the value of the information to the business and its competitors;
- the amount of effort or money expended to maintain the secrecy of the information; and
- the ease or difficulty by which the information could be properly acquired or duplicated by others.
Trade secrets can encompass a wide range of information from technical elements such as machinery to nontechnical aspects like bookkeeping methods. Some examples include formulas such as Coco-Cola’s secret recipe, manufacturing processes like Google’s search algorithm, marketing strategies, financial information, customer lists, and much more.
To maintain trade secret protection, companies must take practical steps—known as the “reasonable efforts” requirement—to keep the information confidential. Examples of these “reasonable efforts” include implementing non-disclosure or confidentiality agreements, restricting access to sensitive information, physical security measures, and educating employees about the importance of confidentiality. Common tactics used to protect confidential information are the use of passwords, using unnamed or coded ingredients, restricting visitors, and keeping documents under lock-and-key.
If a trade secret is misappropriated, there are various remedies the owner of the trade secret may seek. An owner may seek monetary damages for any actual loss incurred, potential exemplary damages for willful misappropriation, injunctive relief to prevent further use or disclosure, and even attorney’s fees.
Trade secrets are a powerful tool for protecting valuable business information and understanding what qualifies as a trade secret and how to protect it is crucial for maintaining a competitive advantage in the business landscape. If you are the owner of a trade secret and want to make sure it’s protected, reach out to our team of experienced attorneys now.
About Griffith Barbee
Griffith Barbee is a boutique intellectual property and commercial litigation law firm in Dallas. Our award-winning lawyers represent companies, business leaders, and entrepreneurs in high-stakes disputes in federal and state courts throughout the country and in tribunals within the U.S. Patent and Trademark Office.
