Things every client should know about trade secrets

How does one secure a trade secret?

In a nutshell, by doing two things: (a) by identifying the information you want to protect; and then (b) by keeping it secret.

Notice that no application process is involved. Rather, in the field of trade secrets, what the law is protecting is the right of a company to develop commercially valuable proprietary information and to be free of the burden of having that confidential information passed to its competitors by improper means.

So, generally speaking, if Alpha Corp. designs a new automotive tool, and publicly sells these tools without restriction in the open market, then, if the design of the tools is not protected by a patent, there is nothing in our law of trade secrets to prevent Beta Corp. from (a) purchasing a tool from Alpha directly (or purchasing it secondhand from one of Alpha’s customers); (b) studying the tool’s construction; and (c) making and selling functionally equivalent copies of the tool in direct, head-to-head, price competition with Alpha. Furthermore, Alpha will have difficulty maintaining that the design of its tool is a trade secret because, by selling it publicly without restriction, it has published its alleged secret to the public.

Suppose, however, that the tool at issue isn’t sold publicly. Rather, suppose that the tool is one used by Alpha Corp. in its internal operations. Perhaps Alpha is an automotive repair company, and its design objective, from the outset, was to design a tool for internal use only that would make it easier for its employees to accomplish certain automotive repairs with greater speed and reliability. If Alpha Corp. has taken reasonable steps to preserve the secrecy of the design, then, if Alpha discovers that one of its competitors Beta Corp. has obtained the design of the tool by improper means, it may sue Beta Corp. to force it to stop using or disclosing the trade secret (and even for the damage Alpha Corp. has endured as a result of the misappropriation).

The key distinction between the first and the second example provided above lies in the fact that, in the second example, Alpha’s alleged trade secret actually was kept secret, so that, if Beta Corp. improperly acquired the secret, Alpha Corp. could take legal action to stop the infringement. The sentence “A trade secret must be kept secret.” appears over and over again in the leading cases in this field of the law.

Thus, when a client consults an intellectual property practitioner about protecting and preserving its trade secret information, the engagement centers upon two primary activities: (a) identifying the kinds of information that need to be protected from unauthorized disclosure; and (b) creating the reasonable procedures and mechanisms necessary to preserve the secrecy of the trade secret. As an example, these procedures and mechanisms can include: (a) standardized employment agreements containing expressly stated duties of confidentiality; (b) need-to-know access control mechanisms regarding facilities and information; (c) training programs to ensure that company employees understand and perform key activities to preserve the confidential nature of the company’s sensitive trade secret information; (d) security / challenge procedures to deal with strangers visiting company facilities; and more.