Almost every business has some information which may be protected as a trade secret. A trade secret can be a formula, design, process or almost any other type of information that gives the owner an advantage over competitors who are not privy to it. A general definition of a trade secret is any information used in business, which is not generally known, and which the owner derives some value by keeping it a secret from its competitors. Perhaps the most famous example of a trade secret is the formula to the syrup used to make Coca-Cola. The formula is rumored to be kept in a bank vault in Atlanta, Georgia and it is known only to a small amount of people who are contractually bound never to reveal it. The secret has given Coca-Cola a significant market advantage in the soft drink industry for over a century.
For some types of information, like customer lists, trade secret law may be the only protection available. For others, like formulas or computer programs, trade secret protection is chosen over another form of protection, such as patent or copyright. Trade secret law has several advantages over other forms of protection. It is broader in scope of protectable subject matter, there are no registration or filing fees necessary and, perhaps most importantly (and unlike copyright or patent protection), trade secret protection has the potential to last forever. To put this last advantage in perspective, consider that the patent for aspirin, which was invented in 1897, expired in 1917. In addition, Mark Twain’s Huckleberry Finn, which was written in 1884, fell into the public domain in 1940. Meanwhile, Coca-Cola, which was invented in 1886, still enjoys trade secret protection to this day. Had the company chosen to patent the formula rather than keep it secret, it would have been available to the public as early as 1903.
Trade secret litigation most often arises in the employer-employee context. An extreme example is the story of the disgruntled Coca-Cola employee who tried to sell Pepsi the formula for an upcoming Coca-Cola product. More typically, trade secret litigation occurs when an employee leaves his job to work for a competitor or to start his own competing business and the former employer wants to keep the employee from using information he acquired while working for the company.
Trade secret law will protect an owner against the misappropriation of his trade secrets. In this context, misappropriation is considered the unlawful acquisition, use or disclosure of information demonstrated to be a trade secret. Wrongful acquisition occurs when a person acquires the trade secret of another and knows or has reason to know, that the secret was acquired through improper means. Wrongful use or disclosure of another’s trade secret occurs when one uses or reveals the trade secret of another without the consent of the owner and the secret was obtained through improper means or from someone who did not have the authority to reveal it. Some examples of trade secret misappropriation are:
- An employee who copies information deemed confidential from the hard drive of her work computer without authorization.
- A competitor who obtains information he knows to be a trade secret from the trade secret owner’s former employee.
- A person who discovers secret information through unauthorized surveillance of the company or its employees.
Trade secret law requires the person bringing a misappropriation claim to prove the existence of the trade secret. However, not all proprietary information will be considered a trade secret for the purposes of the claim. In order to demonstrate the existence of a trade secret, an owner must show not only that the information was used in business and was valuable by virtue of being kept secret from his competitors, but that he took reasonable security measures to ensure the information remained a secret. Many jurisdictions require an owner to prove that the secret was kept secure within the company and that the information was not generally known to the public or the relevant industry. Reasonable security measure are those that restrict access to information and that put those who are allowed access to the information on notice of the existence of a trade secret and of their duty of confidentiality with regard to that secret.
Some steps that can be taken to preserve trade secret status include:
- Clearly marking applicable files, documents, disks, etc., with a notice bearing the owner’s name, advising that unauthorized use or disclosure is prohibited, and stating the information contained within is “Confidential” and/or “Trade Secret.”
- Requiring employees, vendors, contractors and potential business partners or licensees to sign a contract agreeing not to disclose any trade secrets or confidential information that they may acquire as a result of their employment or business dealings with the company.
- Require the use of user IDs and passwords, and restrict access to confidential files to only those employees that have a business need for them.
Trade secrets can be a powerful and profitable business asset. However, trade secret protection is not totally without its risks or drawbacks. It is important to remember that the law only protects against improper acquisition, use, or disclosure of trade secrets. This means there is no remedy against a person who discovers the secret through lawful means like reverse-engineering or independent invention. It also means there is no protection for a trade secret once it becomes public knowledge or generally known within the relevant industry. As such, it is important to be proactive in protecting confidential business information.
If you believe that you have a trade secret issue, whether it involves a business competitor or current or former employee, please contact The Mack Law Office, PLLC at (469) 519-1020 or visit our website at www.macklawoffice.com to submit information about your case. Our office is conveniently located at 1333 W. McDermott Dr., Suite 200, Allen, Texas 75013.
