Trade Secret Basics
A trade secret protects valuable business information by keeping it confidential rather than disclosing it. This chapter defines what qualifies as a trade secret, contrasts trade secret protection with patents and trademarks, and weighs the advantages and disadvantages of relying on secrecy to protect intellectual property.
What Is a Trade Secret
Trade secret law protects intellectual property as an alternative to patents or trademarks, but it works in the opposite way. Where patent and trademark law require the protected material to be publicly disclosed, trade secret law requires that it not be disclosed. A trade secret can be almost any information that has value precisely because it is not generally known, such as a formula, process, or customer list, provided the owner takes reasonable steps to keep it secret.
Trade Secrets Versus Patents and Trademarks
Unlike patent law, trade secret protection has no requirement of novelty or tangibility, and it does not involve an application or examination. Protection extends to information with independent economic value derived from being secret. This makes trade secrets flexible and immediate, but the protection lasts only as long as the information stays confidential, which is a fundamentally different bargain from the limited public monopoly a patent grants in exchange for disclosure.
Advantages and Disadvantages
Relying on secrecy has clear advantages: protection can begin at once, costs little, and can last indefinitely while the secret holds. The disadvantages are just as real. A trade secret gives no protection against a competitor who independently discovers or reverse-engineers the same information, and once the secret becomes public the protection is lost. Misappropriation, the wrongful acquisition or disclosure of a trade secret, is a serious problem with large economic costs worldwide.