IP Basics
In my prior posts on IP Basics, I covered copyrights (what they are and fair use) and trademarks (what they are and the likelihood of confusion test). Today, I’ll go over trade secrets, general laws governing trade secret protection, and how you can protect them at your company.
Trade secrets are a type of intellectual property that protect confidential business information, which has independent commercial value because it is not publicly known. To be a trade secret, the information must have commercial value because it is kept secret and must be subject to reasonable efforts to maintain secrecy. Trade secrets include technical information and commercial information. Examples include customer lists, vendor lists, software code, and UX design files. These all have commercial value to a tech company as they reveal the state of the business, such as potential profits, revenue, and the technology underlying its products. They include the “secret sauce” to a company and are part of what gives a company its competitive edge.
Note that a trade secret owner can’t prevent anyone else from independently developing the same technology or acquiring the same commercial information, as long as they acquired the information themselves and without breaching any confidentiality obligations with others.
Existing trade secret laws cover misappropriation, or theft of trade secrets. Federal law under the Defend Trade Secrets Act (DTSA) allows a trade secret owner to sue in federal court for trade secret misappropriation, while granting legal immunity to whistleblowers so long as their disclosure was only made to report suspected violation of the law.
“Misappropriation” is the acquisition of the trade secret through “improper means”, which include theft, misrepresentation, bribery, and breach of confidentiality, among others. It also includes disclosure or use of a trade secret by someone who used improper means to acquire it, or knew that the trade secret was improperly acquired. Under the DTSA, courts can award damages (i.e. monetary compensation) as actual damages, unjust enrichment, or a reasonable royalty. And, while litigation is ongoing, the court is authorized to issue seizure of any property to prevent further dissemination of the alleged trade secrets.
States also have their own trade secret laws, many of which differ from the DTSA when it comes to remedies.
There is no formal registration process to protect trade secrets, so the only way to protect them is to keep them secret. Here are the most common, and accepted, ways to protect them:
