We have discussed three forms of intellectual property in previous articles, namely patents, trademarks and copyrights.In this article of the four part series, we discuss the issues surrounding trade secrets.
The fourth and final protected form of intellectual property is the trade secret. To qualify as a trade secret, information must be eligible for protection, be secret and have commercial value. Virtually any concrete information can be a trade secret. Expenditures of money and time to develop information are not required for trade secret protection – fortuitous discoveries are protectable. A trade secret owner has the right to prevent its unauthorized use or disclosure by a person who acquired it through improper means. The owner, however, has no rights against any person who acquires the purported secret through other means (e.g. by inspection or analysis of a commercial product). Trade secrets may be protected as long as the owner successfully prevents them from becoming widely known. If information becomes common knowledge, it ceases to be a trade secret.
To protect trade secrets, they must first be identified. Then periodic informal trade secret audits should be conducted. The audits may lead to a list of intangible assets which will help management decide how to deal with the issues of protection. Also, a company should implement a trade secret security program, which puts everyone on notice through use of a policy manual or distribution of periodic memos explaining the basics of trade secrets and why it is pivotal to guard the secrets. Confidentiality agreements for each employee with access to company trade secrets prohibit use or disclosure of company trade secrets and should require return of company documents upon termination. Circulation and physical access of secret information should be limited to an absolute need-to-know basis.
To establish a trade secret violation the alleging party must prove that a trade secret existed, that the accused learned of the trade secret through a confidential relationship or improper means, that the accused used or disclosed the trade secret without the alleging party’s authorization; and that the accused profited from or the alleging party was damaged by the accused party’s use or disclosure of the trade secret. Standard defenses against a trade secret claim include independent development of the information, the information was not a secret, the trade secret owner did not take reasonable precautions to keep the information a secret, and reverse engineering. If a trade secret violation claim is successful, remedies can include injunctions, damages, attorney fees and costs, and seizure of embodiments.