Many of us have heard the term “trade secrets,” but do we really know what they are? Do we understand how they differ from inventions and when they overlap? Most importantly for business people, do we know when to implement trade secret protection instead of patent protection and vice versa? What are the advantages and disadvantages of trade secret protection when compared to patent protection? We will answer these questions in this and following articles.
First, the definition of trade secrets will differ depending in part upon where your business is located. In the United States, the definition most likely depends upon the law of the state in which your business is located. If your business is located in another country, then trade secrets are governed by that country’s law, unless you otherwise agree in an enforceable contract.
Nevertheless, a satisfactory broad definition of a trade secret would be: (1) information which is sufficiently confidential to provide economic value to the owner; (2) from which other persons could obtain economic value from its disclosure; and (3) is the subject of reasonable efforts to maintain confidentiality. An example under Illinois law in the United States would be a qualifying customer list or preferred vendor list. It may surprise many people to learn that novelty is unnecessary for a valid trade secret as long as the information fulfills the above three criteria.
There are circumstances when information cannot be protected as a trade secret. For example, if most persons in a particular industry already possess the information, then no trade secret status is possible. If the information is readily accessible from a public or well known trade source, then there can be no trade secret status. The harsh consequence of these conditions is that trade secrets disclosed in a published patent application, patent or copyright registration generally loses any trade secret status it originally enjoyed.
In the United States an employer owns trade secrets from his business, such as an otherwise qualifying customer or vendor list in our example above. Many courts apply the ownership rules for patentable inventions to similar ownership decisions for trade secrets. This is generally the resolution even if the disputed trade secret does not qualify for copyright registration or a patent in the United States. However, a prior condition to determining ownership and a remedy for misappropriation is that the information qualifies as a trade secret. In the United States, without trade secret status there is no legal remedy for theft except by contract, patent or copyright registration if these are available options.
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