What are Trade Secrets?
The Defend Trade Secrets Act of 2016 (DTSA) is a U.S. federal law. The act was signed into law by President Barack Obama on May 11, 2016. Congress passed this with intent to create a unified definition of what constitutes a Trade Secret. Prior to this, Trade Secrets were protected by state laws.
DTSA provides an owner of a Trade Secret to sue in federal court when its Trade Secrets have been misappropriated.
DTSA states that "All forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, [etc.] … if —
- the relevant information is not generally known or readily ascertainable. (It must be SECRET)
- the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information."
- the owner thereof has taken reasonable measures to keep such information secret"
The difference between Trade Secrets and Confidential information: all Confidential information does not rise to the level of Trade Secret, but all Trade Secrets are Confidential Information. Confidential Information absolutely needs to be bound by a contractual relationship before sharing it.
Understanding Trade Secrets
One way to help establish an idea is to differentiate it from another concept. A good way to establish an understanding of a trade secret is to differentiate it from a patent.
- Patents have limitations – they have to be novel, non-obvious, and useful. Trade Secrets have no such restrictions.
- You can have trade secrets inside a patented process/method or product.
- Patents are required to be publicly disclosed and trade secrets are kept secret/private.
- Patents and trade secrets have different enforceability options and scopes of protection.
- Patents are limited to 20 years, Trade Secrets, can in theory, be forever if treated properly.
Trade Secrets Can Be All of These Things
- Financial information such as costs, revenues, profits.
- Your research and development plans and strategies.
- Your business plans and strategies such as how to grow certain plants or your go to market plan.
- Patents and Trade Secrets have different enforceability options and scopes of protection.
- Customer lists (this is a big one that many employees can take when they leave) so it’s important to protect.
- Your data you develop on market insights, data on product performance, etc., customers, etc; an example might be the data you’ve compiled on the nutrient level of plants at the different growth stages is a good trade secret.
- Provisional Patent Applications
- Anything shared under an NDA which is treated as confidential could be a Trade Secret.
- Anything that took a long time to develop probably has Trade Secrets built in. This is often considered “Know-how.”
Something to consider is that Knowing what not to do could be considered a Trade Secret (most certainly confidential). If you’ve tried a 1000 ways to do something that didn’t work, and one way did work then that information shouldn’t slip out of the company.
What Trade Secrets Cannot Be
- Information generally known by experts or an industry, even if not known by the public, is not a Trade Secret.
Information that is/has been shared publicly is not a Trade Secret (information disclosed in a published patent application or issued patent is not a Trade Secret).
However, information that is derived from public sources but requires laborious accumulation, culling and/or analysis of the information can sometimes qualify as a Trade Secret.
- Information that is derived from public sources or can be easily reverse engineered is not a Trade Secret; Information published on a website, observable on plant tours, disclosed in speeches or publications are not Trade Secrets.