Trade Secret Law
Protecting Confidential Business Information Under Trade Secret Law
Let's say you or someone in your company comes up with new method of doing business or a new idea, but it's not yet ready for patent, trademark or copyright protection. Or maybe it's something you do not want to make public. So what do you do?
In the U.S., you can get some measure of protection by utilizing Trade Secret Laws. One of the best examples of using trade secret law is Coca-Cola. They've protected the formula used for Coke for decades using trade secret laws.
However, unlike patent, trademark, and copyright law which are federally protected, trade secret law is based on state laws. And there can be a great difference with these laws from state to state.
Trade secrets are defined as proprietary or confidential information used in a business. The secret must have monetary value or provide some type of competitive edge. A couple of good examples of trade secrets would be your customer or supplier lists, your marketing plans, proprietary formulas and special manufacturing processes.
In order to qualify for trade secret protection, the idea or business process has to be treated in a way that your competitors would have to engage in illegal activities to obtain it.
Most businesses will establish rights to a trade secret by having outside parties sign agreements that maintain confidentiality before they're introduced to this secret business process. Many of you are familiar with non-disclosure or confidentiality agreements but a quick primer might be in order.
A non-disclosure agreement is used by a business when normal business operations will expose or reveal important components of their technology or business methods. These businesses will force suppliers, venders, sub-contractors, employees, and even customers to sign a non-disclosure agreement.
Unfortunately, a non-disclosure agreement provides no protection to a company against a competitor who does not sign these agreements and ends up creating a similar product or service that is largely identical to yours. The only way to prevent this is to also file a patent application.
Now if an owner of a particular trade secret believes that their confidential information is being used in the marketplace or has been disclosed publicly, they can sue the offending party and ask for an injunction to prevent any further losses. Depending upon what State you're in, these types of cases may be tried in either state court or federal court and typically will be based on contract law and tort principles.
And in this situation, it is not unusual to have the party asking for the injunction to assert other claims such as unfair competition and misappropriation.