Trade Secret FAQ

In most cases an inventor will have to decide (1) whether it wishes to either patent the technology or (2) hold it as a trade secret. The patent system requires an inventor to disclose “an enabling description” and the details of how the technology works in exchange for the patent right, which is essentially a monopoly of limited duration. A trade secret, on the other hand, requires the owner not to disclose the details of how it works. So, in many cases whether a business chooses to maintain a technology as a trade secret versus trying to protect it with the patent system will depend on: (a) how detailed and difficult it is to reverse engineer/ figure out the secret; and (b) the likelihood of achieving meaningful patent protection for the technology. Unless a non-publication request is filed at the patent office, most patent applications publish at 18 months, which would kill any ability to hold the technology as a trade secret. Consequently, in most cases an inventor will have to choose between the patent or trade secret schemes, which are quite different in nature.

The principle issues in trade secret litigation are whether the holder of the claimed trade secret has used “reasonable precautions” to guard the secrecy of the information. A defendant will attempt to show that a trade secret plaintiff has not used Reasonable precautions to maintain the secrecy of the alleged trade secret. Of course, even if the plaintiff can show the existence of a trade secret, the plaintiff will also have to prove that the trade secret has some inherent monetary value To be entitled to damages. To be a trade secret, the secret must give some competitive advantage over other businesses who do not possess the secret. Also, one very critical issue in most trade secret litigation is how a defendant allegedly obtained the trade secret information. If a defendant was able to learn the information by fair means, such as “reverse engineering,” there is no liability. Reverse engineering is the Lawful, competitive process of disassembling and studying a competitor’s product.

Courts have found trade secrets to exist in the form of recipes, compilations of data, lists of customer information, chemical processes, and product component sources.

You should contact an attorney immediately who is familiar with trade secret litigation. If you would like a free consultation, do not hesitate to contact our firm. Do not respond to such allegations without the assistance of counsel.

It is very important to be able to demonstrate that as a business you use reasonable precautions to guard the secrecy of the information regarded as trade secret. This may require restricting information to certain groups of people on a need to know basis. Effective use of passwords on computers may be important, as well as encryption of the most critical information, if it is sent over public networks electronically. Nondisclosure agreements are also beneficial for demonstrating control of information. In many cases, employment agreements and employee handbook can be modified to make sure that employees respect trade secret properties of the business. Ultimately, how a business protects its trade secrets will depend on the nature of the trade secret and the size of its business. If you have questions about putting together a program that will effectively guard your company trade secrets, do not hesitate to contact the attorneys of our firm.