What Constitutes a Trade Secret?

Unlike patents and trademarks, trade secrets are protected without any procedural formalities associated with the benefits of registration with a government agency. The benefit to this is that a trade secret can be protected for an unlimited period of time and requires no public disclosure. The downside is that defining and protecting a trade secret can be trickier.

There are different definitions of what constitutes a “trade secret.” California law has adopted the Uniform Trade Secrets Act definition, qualifying a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that meets two qualifications. The first qualification is that the information must derive “independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use.”  The second qualification is that the trade secret owner must take reasonable steps to maintain the secrecy of the information.

The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, an international agreement administered by the World Trade Organization, similarly defines a trade secret.  According to the TRIPS Agreement, trade secret information cannot be generally known among, or readily accessible to, circles that normally deal with the kind of information in question.  It must also have commercial value because it is a secret, and it must have been subject to reasonable steps by the rightful holder of the information to keep it secret.

Thus, if a company deals with third parties who are privy to a company’s trade secret, it is important to always have them sign confidentiality agreements to make sure they understand that the information is a secret.  Taking those steps not only gives the company a cause of action for breach, but also evidences reasonable steps to maintain the secrecy of the trade secret.  Information that constitutes a trade secret can include processes that make production more efficient, a formula (like the Coca-Cola soft drink formula), customer lists, and proprietary business plans.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, contract, and property claims. Contact us at (310) 277-7747 to see how we can help you with your business needs.

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