A trade secret may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or even a list of customers.
Trade Secret Vs Everyday SecretsTrade secrets are different from other business secrets, for example, the amount or other terms of a secret bid for a contract or the salary of certain employees, or the security investments made or contemplated, or the date fixed for the announcement of a new policy or for bringing out a new model.
A trade secret is a process or device for continuous use in the operations of the business. Generally trade secrets have to do with the production of goods, for example, a machine or formula for the production of an article. However, a trade secret might be the code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.
Secrecy is RequiredTrade secrets must be secret. Anything that is public knowledge or general knowledge in an industry cannot be claimed as a trade secret. Anything that is completely disclosed by the marketed goods cannot be a trade secret, for example, the ingredients are listed so how could the recipe be a trade secret.
Who Can Know a Trade SecretObviously, the proprietor of a business can know its trade secrets. So can the employees (who have been instructed not to disclose the secret) involved in its use. Other people can know the trade secret if they are pledged to secrecy.
Others may also know of a trade secret independently, as, for example, when they have discovered the process or formula by independent invention and are keeping it secret.
Nevertheless, a substantial element of secrecy must exist, so that, except by the use of improper means, there would be difficulty in acquiring the information.
No Exact DefinitionAn exact definition of a trade secret is not possible. Some factors to be considered in determining whether given information is one's trade secret are:
- The extent to which the information is known outside of his business;
- The extent to which it is known by employees and others involved in his business;
- The extent of measures taken by him to guard the secrecy of the information;
- The value of the information to him and his competitors; (5) the amount of effort or money expended by him in developing the information;
- The ease or difficulty with which the information could be properly acquired or duplicated by others.
Trade Secret Vs PatentA trade secret may also be an invention that is patentable; but it does not have to be. A trade secret could be an invention that prior art disqualifies it for a patent, for example, an obvious mechanical improvement that a good mechanic could make.
The same novelty and invention required for a patent are not required for a trade secret. Those requirements are essential to patentability because a patent protects against the unlicensed use of the patented device or process even by one who discovers it properly through independent research. So with a patent you get protection even though everyone now knows what your secret was.
The patent monopoly is a reward to the inventor. That is not the case with a trade secret. Trade secret protection is not based on a policy of rewarding or otherwise encouraging the development of secret processes or devices. The protection is merely against breach of faith and reprehensible means of learning another's secret. For this limited protection it is not appropriate to require also the kind of novelty and invention which is a requisite of patentability.
Punishment for Stealing Trade SecretsHowever, the nature of a trade secret is an important factor in determining the kind of compensation you could get if you sue someone for damages who has stolen your trade secrets. If the trade secret consists of a device or process which is a novel invention and has patentable, the court would ordinarily prevent the further use of, and require the accounting of any profits derived by someone who acquired the trade secret wrongfully.
If, on the other hand, the trade secret consists of mechanical improvements that a good mechanic could make without knowing the trade secret, the wrong doer's liability may be limited to damages, and an injunction against the future use of the improvements made with the aid of the trade secret may be inappropriate.