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Trade Secret FAQ

What is a “trade secret”?

A formula, process, or information that is secret, and gives its owner a business advantage may be protected under State laws concerning trade secrets.  Trade secrets, basically, are any formula, device, or information that is used in a business, and is of such a nature that it gives the owner an advantage over competitors who do not have the information.  Trade secrets are protected under State law rather than Federal law.  This protection may be by virtue of common law or statutory law, such as the Uniform Trade Secrets Act.

Can I register a trade secret?

There is no process for application or registration of trade secret or know-how.  In fact, publication of a trade secret to any third party could destroy its confidential nature.

What factors determine whether something is a “trade secret”?

The factors include:

  • the extent to which the information is known outside the business;
  • the extent to which it is known to those inside the business, i.e., by the employees;
  • the precautions taken by the holder of the trade secret to guard the secrecy of the information;
  • the savings effected and the value to the holder in having the information as against competitors;
  • the amount of effort or money expended in obtaining and developing the information; and
  • the amount of time and expense it would take for others to acquire and duplicate the information

Does the federal government recognize trade secret protection?

It does, but Federal law does not create a civil remedy enabling one private party to take action against another to protect its trade secrets or recover damages from a misappropriation of trade secrets.  The Federal Government (1) makes it a crime for any Federal employee to knowingly disclose the trade secrets of a private party (18 U.S.C. § 1905); (2) makes it a crime for any U.S. citizen, permanent resident alien, or organization organized under Federal, state or local law to disclose trade secrets (18 U.S.C. § 1832) and increases the penalties if such disclosure is made to a foreign country government (18 U.S.C. § 1833); (3) permits injunctive relief against the United States if there is a threat of knowing or inadvertent disclosure of a trade secret by the U.S. Government; and (4) permits the U.S. Court of Federal Claims to award monetary relief in favor of a private party against the United States for damages resulting from the government’s improper disclosure of a trade secret.

How do I mark something “trade secret”?

Generally speaking, if you must reveal a trade secret to a third party, you should have an intellectual property attorney prepare an underlying agreement which includes a statement as to what constitutes a trade secret and what the marking requirements are.  A typical marking requirement may be simply “Proprietary material belonging to NAME”.  For trade secrets that are intangible and cannot be directly marked, such as a process, consider the following steps:

  • carefully define the trade secret in the underlying agreement;
  • mark the physical area where the process is carried out with a restricted access sign; and
  • institute measures for restricting access to the trade secret, such as a sign in sheet and access verification check

How do I choose whether to patent something or keep it as a trade secret?

The answer to this question depends on a host of factors which you should carefully evaluate with an attorney experienced in intellectual property law.  It is an important decision, and each matter must be decided separately, in light of your objectives, the nature of the invention, and a realistic appraisal of the marketplace and technology.

How long does trade secret protection last?

The life of a trade secret may last forever so long as the secrecy is maintained.

What kinds of monetary damages are available for trade secret misappropriation?

Most jurisdictions permit a recovery of both actual loss caused by the misappropriation and any unjust enrichment gained by the culprit so long as the enrichment is not also included in the “actual loss” portion of the equation.  If such damages are not easily proved, the aggrieved party may seek to impose a “reasonable royalty” damages.  In addition, if the conduct leading to the trade secret misappropriation was willful and malicious, most states permit the imposition of punitive damages and the award of attorney’s fees.

Can I transfer trade secret rights to another party?

Yes, through license agreements and assignments.

Inside Trade Secret FAQ