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Trade Secret Resource Center :: Quick Links
What is a Trade Secret?
How Can a Trade Secret Be Protected?
How is Trade Secret Protection Lost?
Using Agreements to Protect Trade Secrets
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What is a Trade Secret?
A trade secret can be almost any piece of information/technical or otherwise, that:
(a) is not a matter of common knowledge in the field or trade;
(b) has some recognizable value and is or can be used continuously to competitive advantage;
(c) has some degree of definiteness or concreteness; and
(d) reasonable steps have been taken to maintain its confidential or secret nature.
For example, production technology, including the composition or formula of manufactured products, specific engineering information used in manufacturing processes, and details of the equipment used for manufacturing the product, constitutes protectable trade secret matter. Computer technology, whether hardware or software, and whether subject to patent or copyright protection, is also protectable as a trade secret. Computer source code is a classic example because source code is generally not supplied to users of the software. In addition, trade secret law can protect algorithms, formulas, or specific procedures that are implemented by the software. Again, such information is ordinarily available only through access to the source code. Conversely, in most States, general engineering or scientific "know how" developed by an employee over time is not considered a trade secret and can walk out the door with the employee.
The element of secrecy is a flexible term under the law. It is not required that the information be known by only one person or business. If it is generally unknown in the field as a whole, it can qualify. If it becomes known by others through improper means (e.g., industrial espionage), secrecy is not necessarily destroyed. Because of the difficulty in maintaining the status of a trade secret and in meeting the requirement that the trade secret information be concrete, accurate record keeping is extremely important. Initially, everything developed by a computer company should be presumed to be a trade secret until an affirmative decision is made to treat it otherwise. If the information is maintained only in the heads of the employees, it will be difficult to control or to establish originality. |
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How Can a Trade Secret Be Protected?
A fundamental principle of trade secret law is that reasonable steps must be taken to protect the secrecy of the trade secret information. Generally, the steps must be such that the information could be obtained by others only through improper means. Typical steps include:
1. Limiting internal disclosure of technical information to those having an actual need to know;
2. Maintaining secret information in a secure and isolated area of the facility;
3. Requiring all employees having access to secret information to sign confidentiality agreements;
4. Placing "CONFIDENTIAL" stamps on all documents containing trade secrets;
5. Prohibiting unescorted visitors and indiscriminate office tours;
6. Implementation of password access to computer systems containing trade secret information. |
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How is Trade Secret Protection Lost?
Unlike the patent and copyright systems, trade secret protection can be lost through no fault of the owner. Trade secret protection can be lost through reverse engineering, independent invention or discovery of the information constituting the trade secret. Another way of losing trade secret protection is through improper licensing. The quickest way to lose trade secret protection is through the departure of employees who have access to trade secrets. |
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Using Agreements to Protect Trade Secrets
Because courts will protect trade secrets and sanction those who misappropriate trade secrets by improper means, every high technology company should have a program to protect their own trade secrets and to prevent the misappropriation of competitors' trade secrets. An important part of such a program is having employees sign confidentiality agreements, non-compete agreements, and agreements stating that they will not use the trade secrets of a previous employer. |
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If you have questions about intellectual property law,
Waddey & Patterson has answers. Any Questions?
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Nashville, TN 37203 • 615-242-2400
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