If you read cases and statutes about trade secrets from anywhere in the world, you will see a three-part definition is used. Trade secret law is remarkably harmonized, unlike patent laws which can vary pretty substantially around the world.
Trade secrets can be viewed as an “elevated” form of confidential information. It’s like a “set” and “subset” – all trade secrets are confidential information, but not all confidential information are trade secrets.
What are the three definition elements, and which are more heavily disputed? For confidential information to be a trade secret, it must:
1) be secret (or at least not generally known);
2) Have value because it is secret; and
3) The trade secret owner took “reasonable measures” to protect it.
Sounds simple, but let’s break each one down.
Secrecy in Trade Secrets
With patents, you have a “novelty” or “absolute novelty” test. Basically, your claimed idea should be new to the world to be considered patentable. If an idea is in the public domain, your claim will not prevail.
With trade secrets, “secret” is right in the name itself, but the standard is a bit more forgiving than patent novelty. The standard is that the idea is “not generally known”.
Secrecy can be lost in various ways, and this connects to the “reasonable measures” that will be discussed later. If you share the information with many outsiders without an NDA or other confidentiality provision, you risk not satisfying the secrecy element.
Obviously if you post something online, publish in a journal, present at a conference, or otherwise make the information publicly available, you will lose trade secret protection for what you disclosed.
Why Value Matters in Trade Secrets
If a trade secret had no value, you wouldn’t especially care about it or be bothered if someone stole it. Trade secrets can have tremendous value and should be treated as a valuable asset.
The value can take many forms. It can directly relate to a commercial product or service. It can improve manufacturing efficiency, improve QC/QA performance, reduce the use of electricity, water, or other inputs. It can improve compliance with regulatory requirements.
Trade secrets, if stolen, can also provide a “head start” or “jump start” for the competitor, allowing them to release a product very quickly without the need to go through long and expensive product development.
Protected by “reasonable measures”
(also the name of Tangibly’s podcast series)
The most interesting, and most heavily litigated element is whether the trade secret owner took “reasonable measures” to protect the trade secret.
The challenge is that “reasonable measures” is not precisely defined anywhere – it is context dependent. What may be reasonable in one scenario may be insufficient in another.
Not all trade secrets have the same value, and don’t need to be equally well protected. A critical “bet the company” trade secret might warrant extreme protection, while a more marginal or low value trade secret may be sufficiently protected with less extreme measures.
The nature of the trade secret owner also impacts reasonable measures. A large multinational company with lots of legal staff and resources can better protect trade secrets than a brand new startup company working out of a founder’s garage and struggling to meet payroll.
Telling a compelling story
Trade secret disputes often come down to storytelling. The trade secret owner will explain that the confidential information was secret, that it was extremely valuable (and that the owner was grievously harmed by the misappropriation), and that reasonable measures were taken to keep the trade secret secret.
Having good evidence and a compelling story increases your chances of a good outcome.
Trade secret protection starts before something goes wrong. Meet with our team to see how Tangibly can help protect your trade secrets.
