In broad terms, a trade secret is information which gives a business an advantage over its competitors. Trade secrets include such things as customer identities and preferences, vendors, marketing strategies, manufacturing processes, formulas and other competitively valuable information. An example trade secret would be a hair salon’s secret process in applying hair dye to make the color stay longer.
Trade secrets are not registered and can last as long as the invention is kept a secret.
Trade Secret FAQs
- Can multiple people have trade secret rights to the same information? Yes, two (or more) individuals or entities can claim rights to the same trade secret on the same technology if both independently developed that technology and both keep it a secret, as long as the technology is not "generally known."
- What is the difference between trade secret protection and patent protection? Both trade secrets and patents are forms of IP that can be used to protect innovation. Although the overall subject matter that can be protected by trade secrets is broader than that which can be protected by patents. Trade secret protection is available for both technical information and information that does not relate to technical innovations. Non-technical information for which trade secret protection can exist includes: business and marketing plans and customer lists. Patent protection is generally available for technical innovations, including a new and useful process, machine, manufacture or composition of matter. Software and software-implemented business methods have the potential of being protected by both patents and trade secrets. Another significant difference is that patent protection requires the protected information become available to the public (through the publication of the patent application and/or patent), However, because patents and patent applications are made public, a third party is barred from duplicating and using the invention until the term of the patent is expired. Additionally, unlike trade secrets, patents can be enforced against someone who independently develops or "reverse engineers" an invention. A trade secret has its own advantages. One significant advantage is that the term of protection for a trade secret has the potential to last forever - as long as the invention is kept a secret - whereas patents are only protected for a limited number of years (20 years from filing). Also, trade secrets can be less expensive to protect and to enforce. In sum, the choice between patent protection and trade secret protection requires careful consideration of several factors. In particular, it is important to consider the nature of the subject matter being protected. Questions relevant to this decision include: Can it be independently developed? Can it be reverse engineered? Can it be maintained as a secret? How long will the subject matter have market value? Does the market value support investment in patent protection/enforcement?
- How long does trade secret protection last? Contrary to other types of IP, trade secrets are protected by non-disclosure; the information must be kept confidential. Thus, an advantage of trade secrets is that they can be protected for an unlimited amount of time. However, trade secrets also have their disadvantages over other forms of IP protection. Unlike patents and copyrights, which grant a monopoly for a fixed period of time, there is no guaranteed monopoly for trade secrets.
- How do I protect my trade secrets? No special registration of government filing is necessary to create trade secrets. The critical requirement for trade secret protection lies in maintaining the secret. Under the Uniform Trade Secret Act (UTSA), information must meet the following three basic criteria to qualify as a trade secret: 1.) the information must not be generally known or readily ascertainable through proper means; 2.) the information must have “independent economical value due to its secrecy”; and 3.) the trade secret holder must use “reasonable measures under the circumstances” to protect the secrecy of the information. “Reasonable measures” may include: Have employees, contractors and third parties sign non-disclosure, confidentiality and/or non-compete agreements. Stamp secret documents “confidential” or “trade secret”. Enforce physical security. Put up "No Trespassing" signs and put locks on doors and file cabinets. Use employee and visitor identification badges to control access to your business. Establish rules requiring people to sign sensitive documents in and out. Set up passwords. Use them to access computers, copiers, fax machines and other machines that could be used to copy or transmit secrets. When employees leave, take measures to ensure that secrets don't leave with them. Collect sensitive materials from the offices of terminated employees before allowing them to return to their desks. And before they go, remind them of the nondisclosure documents they signed and the stiff financial penalties if they are breached. As you may find it necessary to take additional steps in specific areas, or with respect to specific kinds of information to limit access to a “need to know” basis, you may wish to consult a lawyer in your area for guidance into the types of measures and agreements outlined above.
- Can I sell or license my trade secrets? Yes. As long as all parties maintain the secrecy of the invention, trade secrets can be sold or licensed. You may wish to consult an IP lawyer for guidance in writing the agreements in licensing or selling any trade secrets.