An Introduction to the Law of Trade Secrets
| Publication year | 1994 |
| Pages | 2125 |
| Citation | Vol. 23 No. 9 Pg. 2125 |
1994, September, Pg. 2125. An Introduction to the Law of Trade Secrets
Trade secrets can be protected with greater ease, and with less expense, than perhaps any other form of intellectual property. To do so, however, the owner of the trade secret must take affirmative steps to maintain control over the secret information. Unfortunately, many businesses realize the existence, and the value, of their trade secrets only when those trade secrets have been disclosed, either lawfully or not, to third parties.
The purpose of this article is to familiarize attorneys who have not previously practiced in this area with the basic principles of the law of trade secrets. The article provides a general understanding of the nature of trade secret information and the purpose of seeking to protect that information from public dissemination. It also furnishes citations for further research of the law in this area and discusses how to help a business client establish a program to control and protect the business's trade secret information.
Traditionally, trade secrets have been formally defined as "[a]ny formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know how to use it."(fn1) A more comprehensive definition of trade secrets is contained within the Uniform Trade Secrets Act,(fn2) which has been adopted in thirty-seven states and the District of Columbia.(fn3) The Colorado Uniform Trade Secrets Act defines trade secrets as the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.(fn4)
In practice, a trade secret can be any information that provides a business with a competitive edge in the marketplace. The Restatement of Torts suggests that the following factors be considered in assessing whether information is a trade secret:
1) the extent to which the information is known outside the particular business;
2) the extent to which it is known by employees and others involved in the particular business;
3) the extent of measures taken by the particular business to guard the secrecy of the information;
4) the value of the information to the particular business and to its competitors;
5) the amount of effort or money expended by the particular business in developing the information; and
6) the ease or difficulty with which the information could be properly acquired or duplicated by others.(fn5)
Some common examples of business information that may constitute a trade secret include: business methods (such as manufacturing and pricing techniques); complex technology (such as computer software programming); customer lists; and organic technology (such as chemical formulas for hair-care products). Examples of business information that would not be protected as a trade secret include: (1) information that has been disclosed through application for patent or copyright protection and (2) information that would otherwise be protected as a trade secret but has lost that protection by failure of a business to exercise control over the information.(fn6)
Trade secrets have an indefinite term, which is conditioned only on the time it takes for the general public or a competitor to discover the nature and identity of the secret information. As a practical matter, trade secrets may remain perpetually protected, as long as the information is not discovered by others.
The law of trade secrets differs from that of patent and copyright law in that no overall federal legislative scheme exists in this area. The practitioner must look to the provisions of state law to determine substantive issues of trade secrets protection. Moreover, state trade secret protection is not preempted by federal patent and copyright law for patentable or copyrightable information.(fn7)
Prior to the advent of the Uniform Trade Secrets Act (and currently in those states that have...
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