What can be protected as a trade secret?

Nowadays, many entrepreneurs must be protective of their business ideas, methods of operation, and procedures. With the rise of tech startups, it is of no surprise that quite often, the intellectual property is the main asset of the company. However, when considering protections for intellectual property, it is important to understand that not everything is considered a trade secret under the law and, consequently, a business will not have full flexibility in defining what is protected. 

In order to determine what protections to utilize in the safeguarding of business ideas, we must first ascertain what constitutes a trade secret that is allowed lawful protection. A trade secret is defined as intellectual property that can come in the form of a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information, unique to a business that allows it an advantage over competitors. That specific piece of information must create its own economic value.  It should be a core function of the business that affords it its place in its market and that, should the secret be disclosed to a competitor, the public, or otherwise, it would cause undue harm to the business’s prospective future. 

The Uniform Trade Secrets Act, or UTSA, was created to provide a legal foundation for protection of trade secrets from the government. Before this act, improper disclosure or use of a trade secret was treated as a common law tort. Presently, the law provides protection for trade secrets just like it does for copyrights and trademarks - it prohibits the misappropriation of trade secrets. Misappropriation can be defined in many ways but it generally means information was obtained through improper means. This includes theft, bribery, breach of a contract with employer, fraud, and other illegal methods. For example, if you bribe a security guard who is protecting access to a trade secret and they obtain it for you, it is considered improper and misappropriation. In many cases, just the obtaining of information by improper means is enough to make it illegal. Even using information that was voluntarily provided to you by a third party with reason to believe it was obtained by improper means or is distributed in violation of that party’s legal obligation to keep it in confidence can make you liable under the law. Misappropriation of a trade secret is a federal crime.

Six factors are used in the determination of whether or not something can be protected as a trade secret: 

1. Knowledge of the secret outside of the business
2. Extent of the contents of the secret known to the business’s employees
3. Actual enforcement of protecting the secret by the business
4. Real and potent value of the secret exists
5. Time and effort was involved in its creation
6. The difficulty that would be involved in its theft or replication

In order to seek remedy in a trade secret claim, a trade secret must not have been known to the general public and have received proactive protection to safeguard it from misappropriation, and that a theft or breach of disclosure has occurred. Basically, information that can be obtained by other market participants independently, by any methods other than by breaching the company’s secrets, is not considered a trade secret. 

To carry out a legal claim in the event of trade secret misappropriation, the information involved has to be worthy of protecting. It cannot be known to the general population or other businesses. Also, the owner of the trade secret must prove that he or she had provided some form of protection or security in order to stop the information from being leaked to the public. Lastly, the owner must also prove that the disclosure of the trade secret was improper or that information was stolen. There are three common remedies to a trade secret claim - injunctive relief, damages, and attorney’s fees. Injunctive relief means that the court can legally stop the defendant from any further use of the trade secret. Damages, most commonly monetary, can be paid by the defendant to the plaintiff for any economic damage the plaintiff experienced as a result of the violation. The court can also make the defendant pay the plaintiff’s attorneys fees for the lawsuit. The statute of limitations for trade secrets claims is three years after the illegal obtainment or the release of the information.