Let's start with the basics. What is a trade secret?
Trade secrets are intellectual property rights on confidential information. A trade secret protects any business information that gives a company a competitive edge and is unknown to others.
Typically, these conditions must be present to qualify for a trade secret:
- The information must have a commercial value
- A limited group of people knows the information
- Appropriate action retains information secrecy, including confidentiality agreements.
It's best to contact a trade secret attorney if you think your information may qualify as a trade secret.
Types of Information Protected by Trade Secrets
Trade secrets cover technical information and commercial information. They may also include information that is in the public domain. But when that information is combined, it offers a competitive advantage.
Examples include:
- Client lists
- Contract terms
- Prices of goods
- Manufacturing processes
- Computer program designs and drawings
- Distribution methods
- Advertising strategies
- Sales strategies
- Formulas
- Recipes
- Invention
- Methods
By way of example, some of the more famous trade secrets include Google's search algorithm, Coca-Cola's recipe, Listerine, McDonald's Big Mac special sauce, and WD-40.
Requirements for a Trade Secret
Section 757 of the Restatement of Torts established parameters for classification of a trade secret:
- The extent enterprises outside the organization understand the knowledge
- The individuals within the enterprise recognize the knowledge
- Appropriate measures protect the secrecy
- The trade secret worth to the enterprise and its rivals
- The effort or investment required to create the knowledge
- The impact of the trade secret if acquired or duplicated by rivals
Equally important, the information is not easily recognized. It's incumbent on the holder of the trade secret to take actions to prevent information disclosure. The holder must present the information that was wrongfully acquired and misappropriated. Wrongful acquisitions often include espionage, fraud, theft, or bribery.
Essentially, the trade secret owner must make efforts to prevent others from learning the trade secret. Because they are not open to sharing, trade secrets are not subject to registration. That differs from other forms of intellectual property such as trademarks, patents, and copyrights. Each of these requires disclosure of the source material to obtain registration and protection.
Remedies for Trade Secret Violations
To enforce the misappropriation of a trade secret, the Uniform Trade Secrets Act provides remedies when litigating within Pennsylvania. The Defend Trade Secrets Act or DTSA may provide relief at the federal level.
Remedies include monetary relief and equitable relief. Coverage may extend to costs and trade secret attorney fees.
Monetary relief extends to:
- Compensatory Damages
- Royalties
- Punitive Damages
Equitable relief typically involves injunctions, either preliminary or permanent. The former prevents parties from doing an act that is in dispute. The latter prevents parties from conducting activities permanently. That said, permanent injunctive relief generally has a time limit imposed.
Criminal prosecution is also a possibility. The Economic Espionage Act of 1996 prohibits trade secret theft. It allows the United States Attorney General to prosecute a person, organization, or company that steals, copies or receives trade secrets.
Penalties for an individual, if convicted, include imprisonment for up to ten years and a fine of up to $500,000. For corporations, the fine may be up to $5 million. Should a foreign government or agent perform the theft, fines double.
Protecting Your Trade Secrets
One of the best ways to protect your trade secrets is by contacting a trade secret attorney to help draft documents and advise on policies and procedures. Other ways to protect your business include:
- Identify all trade secrets in your business and mark them as confidential. Physically isolate your most important trade secrets.
- List positions and the types of knowledge that are accessible.
- Control access to your secrets with a need to know.
- Have key personnel and third parties sign confidentiality and non-disclosure agreements.
- Train employees on keeping trade secrets safe and monitor their compliance.
- Restrict public access to your business.
- Act quickly when a trade secret is compromised.
Talk to an Attorney Near You
Our trade secret attorneys can protect your business. Our legal services cover the gamut of intellectual property law, including patents, trademarks, copyrights, and trade secrets. We can also support you with business law in general.
Our law offices are in Norristown and Doylestown. Next time you need an attorney near you, give us a call. We've been helping local clients and businesses for more than a hundred years.
