In Business Law, Corporations, Intellectual Property, LLC, Startups

A trade secret is any information that is a secret, has economic value, and is the subject of efforts to maintain its secrecy. Examples of trade secrets are Coca-Cola’s secret recipe and KFC’s chicken recipe. You can use trade secret law to keep your new iPhone app idea a secret or to protect other business information. Trade secrets are different from patents and copyrights, and can be protected by using nondisclosure agreements and noncompete agreements. Other examples of trade secrets include marketing strategies, recipes, algorithms, and many more secrets that have economic value.

Protection. To protect your trade secret, you must actively guard your secret. It will not receive protection without evidence of maintaining its secrecy. This is normally achieved by contracts such as a nondisclosure agreement or a confidentiality agreement.

Misappropriation of Trade Secret. To sue for infringement, you must prove that the information was secret, had value, and that you tried to protect it. The damages can be significant in a trade secret case because normally you are not able to contain the spread of the secret so it turns into an ongoing breach. Imagine what would happen if Coca Cola’s secret recipe were published on social media…

Defenses. There are a few defenses, the first of which is that the person did not disclose the protected information. Another defense is that the person reverse engineered the result. In this case, the argument is that the person did not obtain the information through inappropriate means. An infringer could also defend their action if they learned the information from someone who did not have a duty to maintain secrecy.

Tip. Always have your employees and independent contractors sign either a nondisclosure agreement or a confidentiality clause whenever they are exposed to secret and important information.

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