Article
| Jurisdiction | Utah,United States |
| Citation | Vol. 29 No. 3 Pg. 36 |
| Pages | 36 |
| Publication year | 2016 |
May, 2016
Franchise & Business Law
C Christian Thompson, Judge
A here are a number of important elements of trade secret law. An attorney advising a client regarding its trade secrets must understand the following: (1) what constitutes a trade secret; (2) what to do if a third party misappropriates a client's trade secret; and (3) what steps to take to protect a client's trade secret. Each of these components will be discussed below.
What is a trade secret?
The Utah Uniform Trade Secrets Acts defines a "Trade Secret" as:
information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Utah Code Ann. § 13-24-2(4). Utah has adopted the same definition as the federal Uniform Trade Secrets Act (UTSA).
In summary, a trade secret is a proprietor's confidential bundle of nonpublic information that gives the proprietor a commercial advantage in the marketplace. See David Gurnick and James R. Sims III, The Other IP: Hot Topics in Trade Secrets, Copyrights and Patents, ABA 33rd Annual Forum on Franchising, October 2010, W-14. Trade secrets are often the most valuable asset of a business and those businesses often go to great lengths to protect that information. Two such examples are Coca-Cola and KFC.
Coca-Cola
The complete formula for Coca-Cola is one of the best-kept trade secrets in the world. Although most of the ingredients are public knowledge.. .the ingredient that gives Coca-Cola its distinctive taste is a secret combination of flavoring oils and ingredients known as "Merchandise 7X." The formula for Merchandise 7X has been tightly guarded since Coca-Cola was first invented and is known by only two persons within The Coca-Cola Company. The only written record of the secret formula is kept in a security vault at the Trust Company Bank in Atlanta, Georgia, which can only be opened upon a resolution from the Company's Board of Directors.
....
It is the Company's policy that only two persons in the Company shall know the formula at any one time, and that only those persons may oversee the actual preparation of Merchandise 7X. The Company refuses to allow the identity of those persons to be disclosed or to allow those persons to fly on the same airplane at the same time.
See Hot Topics at 8-9, (citing Coca-Cola Bottling Co. of Shreveport, Inc. v. Coca-Cola Co., 107 F.R.D. 288, 289 (D.Del. 1985) (noting "the complete formula for Coca-Cola is one of the best-kept trade secrets in the world").
KFC
To protect the secrecy of the composition of KFC Seasoning, KFC has designed a blending system for making the seasoning. With permission from KFC, one part of KFC Seasoning recipe is blended by [John W. Sexton Co.] and another part is blended by [Stange Co.] Neither company has knowledge of the complete formulation of KFC Seasoning nor of the other’s specific activities in the production of the other’s part of the product. Both companies have entered into secrecy agreements with KFC, binding them to maintain the confidentiality of that portion of the KFC Seasoning formula to which each is privy. KFC’s relationship with both Sexton and Stange has existed for more than 25 years. No other companies are licensed to blend KFC Seasoning.
After KFC Seasoning is blended by Sexton and Stange, it is then mixed together and sold directly by Stange to all KFC retail operators and to distributors acting on behalf of KFC retail operators.
See id. at 9 (alterations in original) (citing KFC Corp. v. Marion-Kay Co., 620 F. Supp.1160 (S.D. Ind. 1985)).
Although Coca-Cola and KFC go to extreme lengths to protect their trade secrets, the Utah Trade Secret Protection Act only requires that the holder of a trade secret take efforts “that are reasonable under the circumstances to maintain its secrecy.” Utah Code Ann. § 13-24-2(4). Therefore, clients should take comfort that although they must take efforts to protect their trade secrets, they need not take the same measures as Coca-Cola and KFC to do so.
Trade Secret Misappropriation
A plaintiff alleging a misappropriation of trade secret must prove three elements: (1) the existence of a trade secret; (2) the use or communication of the trade secret (which may be circumstantial) under an express or implied agreement limiting disclosure of the secret, or by a person who obtained it by improper means; and (3) the defendant’s use of the secret that injures the proponent. See CDC Restoration & Constr. v. Tradesmen Contractors, 2012 UT App 60, ¶ 15, 274 P.3d 317 (citing Water & Energy Sys. Tech., Inc. v. Keil, 1999 UT 16 ¶ 9, 974 P.2d 821).
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