Trade Secret Law

Trade secret law protects the right of a business to its confidential, proprietary information.  Most states have adopted the Uniform Trade Secrets Act, some with amendments to the uniform act.  A trade secret is defined under the uniform act as “information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by property means by other persons who can obtain economic value from its disclosure or use,  and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Such a broad definition includes virtually all kinds of business information that would have economic value to a competitor, but only if the business which possesses such information takes reasonable steps to maintain its secrecy.

Patent, trademark and copyright are ways to maintain the economic value of something for a business.  Trade secret law offers protection for business information that may not have patent, trademark or copyright protection.  Sometimes trade secret law offers more protection than, for example, a patent.  Coca-Cola Corporation relies upon trade secret protection for its drink formulas.  The main advantage of doing so is that a trade secret can have unlimited duration.  It is also possible for a patent to be invalidated by a court, in which case the company would have made a public disclosure of the details of the invention in the patent application and would receive no benefit for having divulged its previously secret information.  For a product that can easily be reverse engineered, it would likely be unwise to rely upon trade secret protection.  In such a circumstance, a patent would likely provide more protection.

The steps necessary for a business to maintain the secrecy of its information so that it will have protection under trade secret law will vary depending upon the nature of that information.  It most likely will require limiting the number of employees who have access to the information to those who have a need to know it; requiring those employees to sign a confidentiality agreement before permitting them to have access to the confidential information; disclosing some, but not all of the information, to a given employee; keeping the information under lock and key; placing a notice on documentary information that it is confidential and proprietary information; and other like measures.

The above comments are intended to illustrate general principles only.  There are often exceptions to general rules which apply in certain circumstances.  Laws change over time by subsequent enactment of legislation and by court decision.  Legal principles can differ from one jurisdiction to another.  Particular factual circumstances may result in a different legal conclusion.  If you have a question about a particular factual situation you should consult with an attorney.

David Harrison is experienced in Virginia trade secret law.

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