A trade secret is confidential information that is used in business that confers a competitive advantage over other companies or individuals that do not know of or use it. It can be technology, compilations such as lists of customers, business methods, devices, techniques or processes, among other items.
Although many trade secrets cannot be protected under patent law, some trade secrets can be protected in this manner. But the business that holds them does not wish to be subject to the time limitations on their validity. The formula for Kentucky Fried Chicken is a good example: Yum! Brands, the company that owns KFC, doesn’t want its formula patented because patent protection only lasts for 20 years.
Legitimate and Illegitimate Access
One of the disadvantages of holding a trade secret is that, if someone manages to obtain the information through legitimate means, they can use it as they please and there is very little you can do about it. On the other hand, if your employee or a competitor hacks into your computer database, discovers a trade secret, and uses it to start his own company, you definitely do have legal recourse – including criminal sanctions, in some cases.
The Defend Trade Secrets Act of 2016
The World Trade Organization (of which the United States is a member) obligates its signatories to take legal steps to protect trade secrets held by both domestic and foreign entities and individuals. The Defend Trade Secrets Act of 2016 (DTSA) is the U.S. federal government’s response to bring it into compliance with WTO standards (state law remedies for trade secret violations have been available for quite some time, however).
The DTSA allows you to sue in federal court for trade secret violations, thereby eliminating (theoretically) the possibility of local bias when an out-of-state plaintiff sues in another state’s court. Although minor discrepancies exist among state trade secret laws, they are mostly harmonized because almost every state has adopted the Uniform Trade Secrets Act.
The Pros and Cons of Trade Secret Protection
The primary advantages of trade secret protection are:
Trade secret protection can potentially endure forever. Think about how long the formula for Coca-Cola has been protected, for example.
There is no need to publicize the details of a trade secret. Patent protection, by contrast, requires complete disclosure before a patent is even granted.
The primary disadvantages of trade secret protection are:
Trade secret law does not protect against independent discovery. If someone else comes up with the same idea on their own, you have no recourse against them.
Trade secret law does not protect against reverse engineering. Of course, reverse engineering can be difficult or impossible, depending on the nature of the secret.
To qualify for trade secret protection, you must make an effort to keep the information secret. There is no need for such an effort for patent protection since the information has already been disclosed to the public.
An Ounce of Prevention Is Worth a Pound of Cure
At CKB Vienna LLP, we can help you create a trade secret protection policy that can protect your business interests for years or even decades to come. And if you are already involved in a trade secret dispute, we are adept at applying the pleasure/pain principle to stop the leakage of your confidential information in a forthright manner – and win you financial compensation in the process.
Call us at 909-980-1040 or fill out our online contact form to learn how we can best assist you. We serve clients from all over the Rancho Cucamonga area, including Alta Loma, Etiwanda, Upland, Fontana, Ontario, Chino Hills, and Claremont.