A trade secret is business information that a company has made reasonable efforts to keep secret and has a value because it is not generally known in the trade. Such confidential information will be protected against those who have obtained access through improper methods or by a breach of confidence. Infringement of a trade secret is a tort and a type of unfair competition. In the case of a contractual relationship, infringement may also constitute breach of contract.
The law of trade secrets is a matter of state, not federal law. Accordingly, in assessing whether a particular piece of information is protectable as a trade secret and the remedies available for misappropriation, one must look to state law. In those states that have adopted the Uniform Trade Secrets Act (UTSA), trade secret law is governed by the provisions of the UTSA. It also has been held that misappropriation of a trade secret can form the nucleus of an allegation of a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
The law of trade secrets can potentially provide broader and longer lasting protection than either a patent or copyright. Coca-Cola, for example continues to maintain the secrecy of its formula. While patents and copyrights must meet certain requirements in order to issue, a trade secret is not so restrictive. Moreover, while patent and copyright provide a fixed term of protection, as long as the trade secret is properly maintained and preserved in secrecy, its protection continues.
As noted, the UTSA requires that the information must not be capable of being readily ascertained by “proper means.” Proper means is not defined in the UTSA. However, if others are able to discover or ascertain the confidential information by examining the product or by reverse engineering a product which is publicly available and which incorporates the trade secret or by independent development, the information will not be protected.
Enforcement of Trade Secret Rights
Once it has been determined that the information is a protectable trade secret, the owner must establish that the secret was misappropriated, that is that the secret was acquired by improper means in violation of the owner’s rights. “Improper means” is defined to include “theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy or espionage through electronic or other means.” Misappropriation may also implicate third parties where the party knows or had reason to know that it was the recipient of protected information that was acquired by improper means.
The UTSA provides a number of remedies for misappropriation of trade secrets. Actual or threatened misappropriation may be subject to injunctive relief and may also allow the Plaintiff to recover actual damages and disgorgement of unjust enrichment traceable to the misappropriation. The Court may assess a reasonable royalty for the value of the trade secret misappropriated in lieu of damages measured by those methods. Willful and malicious misappropriation can result in an award of treble damages and attorney’s fees.
Similar to other intellectual property rights, the best way to protect a company’s trade secrets and other ideas and developments is to establish and implement sound policies for recognizing proprietary and trade secret information.