Trade secret Totally Explained

Everything about Trade Secrets totally explained

A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which isn't generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers. In some jurisdictions, such secrets are referred to as "confidential information" or "classified information".

Definition

The precise language by which a trade secret is defined varies by jurisdiction (as do the particular types of information that are subject to trade secret protection). However, there are three factors that (though subject to differing interpretations) are common to all such definitions: a trade secret is some sort of information that:

isn't generally known to the relevant portion of the public;
confers some sort of economic benefit on its holder (where this benefit must derive specifically from its not being generally known, not just from the value of the information itself);
is the subject of reasonable efforts to maintain its secrecy.

Protection

A company can protect its confidential information through non-compete non-disclosure contracts with its employees (within the constraints of employment law, including only restraint that's reasonable in geographic and time scope). The law of protection of confidential information effectively allows a perpetual monopoly in secret information - it doesn't expire as would a patent. The lack of formal protection, however, means that a third party isn't prevented from independently duplicating and using the secret information once it's discovered.
The sanctioned protection of such type of information from public disclosure is viewed as an important legal aspect by which a society protects its overall economic vitality. A company typically invests time and energy (work) into generating information regarding refinements of process and operation. If competitors had access to the same knowledge, the first company's ability to survive or maintain its market dominance would be impaired. Where trade secrets are recognized, the creator of knowledge regarded as a "trade secret" is entitled to regard such "special knowledge" as intellectual property.
Trade secrets are not protected by law in the same manner as trademarks or patents. Specifically, both trademarks and patents are protected under Federal statutes, the Lanham Act and Patent Act, respectively. Trade secrets arise out of state laws. Most states have adopted the Uniform Trade Secrets Act (UTSA). Only Massachusetts, New York, New Jersey, North Carolina, and Texas have not adopted the UTSA. One of the most significant differences between patents and trademarks and trade secrets is that a trade secret is only protected when the secret is not disclosed.

Comparison with trademarks

To acquire rights in a trademark under U.S. law, one must simply use the mark "in commerce." It is possible to register a trademark in the U.S., both at the federal and state levels. (Registration of trademarks confers some advantages, including stronger protection in certain respects, but it isn't required in order to get protection.) However, the "down side" of such protection is that it's comparatively easy to lose (for example, to reverse engineering, which a patent will withstand but a trade secret will not) and comes equipped with no minimum guaranteed period of years.
Historically, trade secrets have existed since early times in the form of keeping advanced military technology from one's enemies, and in more recent times, in keeping Industrial Revolution-era technology secret.

Discovering trade secrets

Companies often try to discover one another's trade secrets through lawful methods of reverse engineering on one hand and less lawful methods of industrial espionage on the other. Acts of industrial espionage are generally illegal in their own right under the relevant governing laws. The importance of that illegality to trade secret law is as follows: if a trade secret is acquired by improper means (a somewhat wider concept than "illegal means" but inclusive of such means), the secret is generally deemed to have been misappropriated. Thus if a trade secret has been acquired via industrial espionage, its acquirer will probably be subject to legal liability for acquiring it improperly. (The holder of the trade secret is nevertheless obliged to protect against such espionage to some degree in order to safeguard the secret. As noted above, under most trade secret regimes, a trade secret isn't deemed to exist unless its purported holder takes reasonable steps to maintain its secrecy.)

Legal development to protecting trade secrets

A relatively recent development in the USA is the adoption of the UTSA, the Uniform Trade Secrets Act, which has been adopted by approximately 45 states as the basis for trade secret law. It is believed that a measure of uniformity among different states' laws will strengthen business' claims on their trade secrets.
   Another significant development in U.S. law is the Economic Espionage Act of 1996, which makes the theft or misappropriation of a trade secret a federal crime. This law contains two provisions criminalizing two sorts of activity. The first,, criminalizes the theft of trade secrets to benefit foreign powers; the second,, criminalizes their theft for commercial or economic purposes. (The statutory penalties are different for the two offenses.)
   In Commonwealth common law jurisdictions, confidentiality and trade secrets are regarded as an equitable right rather than a property right (with the exception of Hong Kong where a judgment of the High Court indicates that confidential information may be a property right). The Court of Appeal of England and Wales in the case of Saltman Engineering Co Ltd v. Campbell Engineering Ltd, (1948) 65 P.R.C. 203 held that the action for breach of confidence is based on a principle of preserving "good faith".
   The test for a cause of action for breach of confidence in the common law world is set out in the case of Coco v. A.N. Clark (Engineers) Ltd, (1969) R.P.C. 41 at 47:

the information itself must have the necessary quality of confidence about it;

that information must have been imparted in circumstances imparting an obligation of confidence;

there must be an unauthorized use of that information to the detriment of the party communicating it. The "quality of confidence" highlights that trade secrets are a legal concept. With sufficient effort or through illegal acts (such as break and enter), competitors can usually obtain trade secrets. However, so long as the owner of the trade secret can prove that reasonable efforts have been made to keep the information confidential, the information remains a trade secret and generally remains legally protected. Conversely, trade secret owners who can't evidence reasonable efforts at protecting confidential information, risk losing the trade secret, even if the information is obtained by competitors illegally. It is for this reason that trade secret owners shred documents and don't simply recycle them.
A successful plaintiff is entitled to various forms of judicial relief, including:

an injunction

an account of profits or an award of damages

a declarationFurther Information

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