When Other IP Protection is Not Available

A requirement for patent, trademark, or copyright protection is originality. Therefore, collections of data cannot be protected by either of those types of intellectual property. You did not create the data, you merely collected and assembled it. If you create a database of client names and contact information, you cannot patent or copyright that information.

However, this information is not generally known and affords you a competitive advantage- therefore it constitutes a trade secret. If you take the proper steps to maintain the confidentiality of this information, it will be entitled to legal protection as such.

When Other IP Protection is Inadequate

Trade secrets are most often used as an alternative to patents. Patents can be very powerful and valuable IP assets, but they have some drawbacks and are not appropriate in every situation. Patent protection begins at the time your patent is granted, which may be three, four, or even more years after you initially file your application, and only lasts 20 years from the time your application is filed. Patents also must be enforced by the patent owner.

When Patent Protection is Too Short or Begins Too Late

Software applications generally have one of the longest wait times at the Patent and trademark Office. If you have some software that you invented that is going to be obsolete in three years, it may not make sense to file a patent application that is not going to issue for five years. On the other end of the spectrum, if you have a recipe that you may be using for 100 years (e.g. Coke), you don’t want your protection to expire after only twenty years, leaving your recipe in  the public domain (patents are publicly available).

When Enforcement of Your Intellectual Property Rights is Difficult

With some technology it is difficult to prove that someone is infringing your patent. For example with software, the code may be run on a remote server and may be inaccessible to you. Therefore, it may be difficult to get enough information about the suspect software to determine if it is worth spending the money to initiate a patent infringement lawsuit. Why get a patent and disclose your invention to the public if it will be difficult or impossible to stop your competitors from using that information?

Conclusion

The use of trade secrets should be a part of your overall intellectual property strategy. When it is time to decide whether you can protect a given asset, or how best to protect  it, consider the relative benefits and drawbacks of different types of protection. You should at least consider trade secret protection when 1) your  intellectual property cannot be protected by patents, trademarks, or copyrights, 2) when the term of patent protection would be too short or start too late, or 3) when a patent would be difficult to enforce.

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

In that vein, I recently came across a set of informational videos available at the World Intellectual Property Organization (WIPO) website here.  These Flash videos are geared towards small and medium-sized entities (SMEs) and address all the different types of intellectual property and their importance to the success of a business.

They have some really great practical information that just about any business owner or manager would benefit from reviewing.  My only complaint is that they seem to run somewhat slowly at times, perhaps due to the Flash implementation.

Take a look and let me know what you think about the videos in the comments.