The three types of intellectual property (IP) that you hear about the most are patents, trademarks, and copyrights. However, a fourth category of intellectual property, trade secrets, also exists.
Trade Secrets are Governed by State Law
Trade secrets are generally governed by state law, as opposed to the first three types of IP, which are almost entirely governed by federal law. Therefore, the rules can change somewhat from state to state. However, most (46) states have adopted the Uniform Trade Secrets Act (UTSA), so the law is pretty similar in most places. This post will be about trade secret law in general- there could be differences in your state.
Definition of Trade Secrets and Confidentiality Requirement
Trade secrets are any business knowledge or information that is not generally known or reasonably ascertainable and that conveys an economic advantage. A classic example of a trade secret is the formula for Coca-Cola.
The law protects trade secrets if reasonable efforts are made to maintain their confidentiality. At a minimum, trade secrets should be marked confidential and access to them should be restricted to those employees with a specific need. If you must discuss a trade secret with an outside party, a non-disclosure agreement should be used.
When Trade Secrets are Useful
Trade secrets are generally the protection of last resort. Trade secret protection is relied on when patent, trademark, or copyright protection cannot be obtained or is not adequate. Trade secrets are frequently relied on to protect databases of client or vendor information, market analysis, business plans, office processes, etc.
Trade Secret Remedies
If a trade secret is stolen or given or sold to a competitor by a present or former employee, trade secret protection entitles you to collect damages from both the party revealing the secret and the party receiving it. An injunction preventing the secret from being revealed more widely can also be obtained.
As an example, if Pepsi paid a Coca-Cola employee to reveal the secret Coke formula, both Pepsi and the Coca-Cola employee could be sued for monetary damages and to prevent them from revealing the formula to anyone else. They also could be guilty of a federal crime under the Economic Espionage Act.
Additional Trade Secret Resources:
UTSA full text
UTSA Wikipedia entry
Economic Espionage Act Wikipedia entry
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