What Is a Trade Secret?

What Is a
Trade Secret?
The law of trade secrets is distinguished by the amount of effort
that is spent defining its very subject: what is a trade secret? It
has been called “ one of the most elusive and difficult concepts in
the law to define.’” Learning Curve Toys, Inc. v. Playwood Toys, Inc.,
342 F.3d 714, 723 (7th Cir. 2003) (quoting Lear Siegler, Inc. v. Ark-Ell
Springs, Inc., 569 F.2d 286, 288 (5th Cir. 1978)). Similarly, it has been
said that “the concept of a trade secret is at best a nebulous one and
has been variously defined by case and text authority.Van Pro ds .
Co. v. General Welding & Fabricating Co., 213 A.2d 769, 775 (Pa. 1965).
There are a number of different definitions of “trade secret”
statutory and common law, state and federal. Case law explores the
nuances and distinctions between them and in their application,
but certain fundamental principles stand out. All of the definitions
and tests are intensely fact-specific. The inquiry centers around
secrecy—a trade secret must not be generally known to others and
this secrecy must be safeguarded by its owner’s reasonable efforts.
A trade secret must also be valuable, and this also arises from
secrecy: a trade secret provides a competitive advantage when
competitors and prospective competitors do not know it.
I. Sources of Applicable Law
Trade secrets are generally governed by state law. See, e.g., Leggett
& Platt, Inc. v. Hickory Springs Mfg. Co., 285 F.3d 1353, 1360 (Fed. Cir.
2002); Thermodyne Food Serv. Prods., Inc. v. McDonald’s Corp., 940 F.
Guide to Protecting and Litigating Trade Secrets
Supp. 1300, 1304 (N.D. Ill 1994). While 46 states have adopted the
Uniform Trade Secrets Act (UTSA), the state law of trade secrets is
far from uniform. For starters, four states making up close to 20
percent of the U.S. Gross Domestic Product1 have not enacted it:
Massachusetts, New York, North Carolina, and Texas.2 Many states
that have enacted the UTSA have done so with important modifi-
cations, and there is significant variance between jurisdictions as
to the application of common elements.3 A primary concern when-
ever counsel addresses trade secrets will be what law applies.
A. The Uniform Trade Secrets Act
The UTSA was approved by the National Conference of Commis-
sioners on Uniform State Laws in 1979, with amendments approved
in 1985.4 It has b een ado pted i n some f orm by 4 6 state s and t he Dis -
trict of Columbia.5 It defines a trade secret as
information, including a formula, pattern, compilation, pro-
gram, device, method, technique, or process, that:
(i) 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
(ii) is the subject of efforts that are reasonable under the cir-
cumstances to maintain its secrecy.
UTSA § 1(4).
The UTSA also defines trade secret misappropriation at section
1(2) (as discussed in chapter 2 of this book); provides for remedies
in sections 2 through 4 (as discussed in chapter 6); and addresses
procedural issues arising in trade secret litigation in the remain-
ing sections (as discussed in chapter 5). Section 8 provides that
the UTSA “shall be applied and construed to effectuate its general
purpose to make uniform the law with respect to the subject of [the
UTSA] among states enacting it,” but even in the 46 states that have
adopted the UTSA, we are far from having a nationally “uniform”
law of trade secrets. Many state legislatures have tinkered with
the “uniform” Act. The variances have led a leading commentator
to refer to the UTSA as the “non-Uniform Trade Secrets Act.”6 A
practitioner needs to be aware of the many differences among the
enacting states’ versions of the UTSA.7

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