What is a Trade Secret?

by Lizbeth Hasse

Basic IP Terminology—What is a Trade Secret?

My past two blog posts in the basic IP terminology series have addressed copyright and trademark, respectively.  This third and final installation of the series will cover the area of trade secret law and what type of information can constitute a protectable trade secret.

Donut factory line 1 300x225 - What is a Trade Secret?

What is a Trade Secret?

Under the Uniform Trade Secret Act (UTSA), which has been enacted by most states (including California) and the District of Columbia, a trade secret has three basic components:

  • It consists of information of some kind (such as a formula, pattern, compilation, program, device, method, technique or process);
  • It has economic value (actual or potential) by virtue of the fact that it is not readily available or ascertainable to the general public; and
  • The owner has made reasonable efforts to guard the secrecy of the information.

Unlike copyrights and trademarks, trade secrets are not registered with any governmental body.  In fact, the very fact that they are secret and not disclosed publicly is the key to their value.

One example of a trade secret is a formula for a type of food or beverage.  Recipes are generally not protectable by copyright because they contain merely factual lists of recipes (note, however, that where a recipe is accompanied by directions, the directions may be copyrightable, but the list of ingredients is not.  Trade secret law allows manufacturers of food and drinks to protect their recipes by keeping them private.  If someone were to misappropriate the recipe or formula in question, they could be liable to the owner under trade secret law.

Note, however, that use of another person’s trade secret does not always constitute an illegal misappropriation.  For example, one could reconstruct a formula or recipe independently or reverse engineer a recipe from an existing product.  However, where a trade secret is acquired through improper or illegal means or where it involves a breach of confidentiality, the use of that trade secret may give rise to liability.  Claims of this type are most frequently brought where an employee leaves a job for a new position and takes with them the trade secret information for use or disclosure with his or her new employer.

Unlike certain other types of intellectual property (like copyrights and patents), protection of a trade secret does not last for a set or specific number of years.  Rather, it continues indefinitely until the trade secret is no longer a secret.  Other examples of trade secrets include customer lists and business contacts (if they cannot be ascertained from other public sources), manufacturing details or processes, etc.  If you think that your trade secret may have been misappropriated by another, contact an attorney specializing in this area for a consultation.

[Image Credit: Irina Slutsky from San Francisco, USA (CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)]

Attorney 1 - What is a Trade Secret?

Lizbeth Hasse

Lizbeth Hasse is the founder of Creative Industry Law. Her practice encompasses intellectual property, media, entertainment and business counseling for corporate and individual clients. She is also a neutral expert in these areas, negotiating and resolving IP, business and media matters.
Attorney 1 - What is a Trade Secret?

About Lizbeth Hasse

Lizbeth Hasse is the founder of Creative Industry Law. Her practice encompasses intellectual property, media, entertainment and business counseling for corporate and individual clients. She is also a neutral expert in these areas, negotiating and resolving IP, business and media matters.