What You Need to Know About Trade Secret Protection

A trade secret is confidential intellectual property that provides the owner with a competitive advantage in the marketplace and is thus deemed worthy of protection under the law. Examples of trade secrets include drink recipes, manufacturing techniques, computer algorithms, and marketing and other business strategies.

To ensure that your confidential trade secrets cannot be used for commercial purposes without your consent, it’s important to understand the ins and outs of trade secret protection. This article provides a good start by introducing seven key facts every business owner should know about trade secrets.

7 Facts About Trade Secret Protection

It is not a violation of trade secret law for someone to discover the secret independently. Trade secret protection only applies when the secret is unlawfully revealed or discovered through improper means such as espionage, bribery, or breach of a duty of confidentiality. Most people are surprised to learn that reverse engineering of a product, recipe, or the like in order to discover what is otherwise entitled to trade secret protection is typically NOT unlawful!
Employees who regularly come in contact with a trade secret as part of their job are automatically bound by a duty of confidentiality and cannot disclose the trade secret to others. This is true even if the employee has not signed a confidentiality or nondisclosure agreement (NDA). However, such agreements are very useful and can confer greater trade secret rights and protections upon the owner.
The owner must take reasonable steps to protect a trade secret. For example, having employees sign NDAs, marking as “Confidential” all documents containing trade secret information, and limiting employee access to trade secret information are all reasonable precautions that help objectively establish the owner’s intent to protect its trade secret. Absent such objective evidence of affirmative steps by the owner to maintain the confidentiality of its trade secret, a court may determine that the owner’s asset is not entitled to trade secret protection.
Stealing a trade secret is a crime that, upon conviction, carries with it potential incarceration as well as financial penalties.
In a civil suit brought to enforce trade secret rights, a court can award damages for actual losses suffered by the owner as a result of the unauthorized use of the trade secret information and payment of the amount by which the competitor was unjustly enriched as a result of its misappropriation of the trade secret.
For cases in which the resulting harm is so severe that money damages are either incalculable or insufficient to make the owner whole, a court may provide injunctive relief, which in this case would be a court order precluding the defendant from continuing to use the trade secret. Such relief may be temporary or permanent.
Aside from providing distinct competitive advantages to the owner on a day-to-day basis, properly maintained trade secrets can also become an extremely valuable long-term asset that may be licensed, assigned, or sold by the owner. Ensuring proper trade secret protection from day one is thus extremely important for long-term viability and profitability for the owner.

FSKS is on Your Side

Trade secret protection can be the difference between a successful business that endures for years with significant advantages over its competitors and one that goes under because it failed to take the necessary steps to protect its trade secrets from being utilized and leveraged by others. Of course, the Intellectual Property team at FSKS can help make sure your trade secrets are well protected and will provide you with significant value and competitive advantage for many years to come. If you have any questions about trade secrets or any other intellectual property matter, please contact Alan Golub (agolub@fskslaw.com) at 973-538-4700.