Trade Secret FAQ

Austin Patent & Trademark Attorney

Trade Secret FAQ

Frequently Asked Questions

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What is a trade secret and can we protect one?

A trade secret can be any formula, pattern, compilation or device that gives a business a strategic advantage that other businesses do not possess. First and foremost, a trade secret has to be something that is actually kept secret. If a business wants to keep something as a trade secret it has to be able to demonstrate using reasonable precautions to keep that secret—a secret. Something that is in the public domain or “readily ascertainable” cannot be a trade secret.

Can we file a patent and keep a trade secret at the same time?

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.

What issues are involved with trade secret litigation?

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.

What are examples of trade secrets?

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.

What should we do if we received a letter or a lawsuit alleging that we took trade secrets or confidential information?

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.

As a business, what steps can we take to help protect our trade secrets?

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.

If you have an intellectual property matter that you would like to discuss with the attorneys of The Buche Law Firm, PC, please do not hesitate to contact us for a free consultation.