What Is a Trade Secret?
There are three basic elements of a trade secret: (1) it is not generally known to the public (and is not readily ascertainable by proper means); (2) it confers economic benefit on its holder because the information is not publicly known; and (3) the holder makes reasonable efforts to maintain its secrecy. But it can be just about any type of information.
Examples of trade secrets given in the Uniform Trade Secrets Act (UTSA) are “a formula, pattern, compilation, program, device, method, technique, or process” and the federal Defend Trade Secrets Act (DTSA) definition gives as examples “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes . . . .” Trade secrets can also potentially encompass customer lists, marketing and distribution strategies, etc.
Protecting Trade Secrets
Determining what steps must be taken to protect a trade secret will depend on the circumstances and the nature of the information in question but principally comes down to what constitutes reasonable efforts to maintain secrecy. Such efforts must always involve affirmative acts. At a minimum, you must be able to point to specific protective steps affirmatively taken to guard trade secrets that go beyond normal business practices applied to all business information.
To restate the obvious, remember that trade secrets must have been kept secret. In this sense, you cannot “un-ring a bell” and later claim as a trade secret something that was not kept secret in the first place or was publicly disclosed at some point. It is possible to abandon trade secrecy protections. So whatever protective measures are put in place they must actually be followed.
Example Affirmative Measures to Maintain Secrecy
Common affirmative measures to protect trade secrets include the following. But, alone, any one of these steps may be insufficient.
Contracts such as non-disclosure agreements (NDAs) or confidentiality clauses inserted in other types of agreements can help establish trade secret status while allowing necessary personnel access to information. And such agreements may benefit from further terms defining or otherwise acknowledging that certain types of information qualify as enforceable trade secrets.
Confidential materials can also be marked as such to explicitly make clear trade secret claims. Marking can be especially important where materials are exchanged under an NDA. More generally, make sure recipients of trade secrets understand applicable secrecy requirements. Though, for instance, the Minnesota UTSA states that “[t]he existence of a trade secret is not negated merely because an employee or other person has acquired the trade secret without express or specific notice that it is a trade secret if, under all the circumstances, the employee or other person knows or has reason to know that the owner intends or expects the secrecy of the type of information comprising the trade secret to be maintained.”
Access to trade secret materials can also be limited, which can help minimize risks of accidental or unintended disclosures. Departing employees should also be cut off from access to trade secret materials. Computer/IT systems and physical spaces containing trade secret information should be secured and protected from unauthorized access.
Lastly, an employee or executive could be appointed to oversee protection of some or all trade secrets.
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