What does a Trade Secret Protect?

A trade secret protects those business secrets not generally ascertainable to the public, by which a company can obtain an economic advantage over its competitors or customers. Specifically, trade secret protection affords protection from unfair competition through the misappropriation of the trade secret by an employee or third-party.

What types of business secrets qualify for trade secret protection?

Any formula, process, design, or compilation of information, which, as mentioned, is not generally ascertainable and provides a company with a competitive advantage, qualifies as a trade secret. Think, for example, of the secret formula for Coca-Cola.

More specifically, the Uniform Trade Secrets Act (UTSA) defines a “trade secret” as “information, including a formula, pattern, compilation, program, device, method, technique, or process that” derives independent economic value from its secrecy and has reasonable precautions taken to protect from its unauthorized dissemination.

How is trade secret protection ascertained?

Unlike other forms of intellectual property, trade secrets are not registered. Rather, the USTA definition tells us that, in order for the right in a trade secret to exist, it must be: (1) valuable because others don’t know about it; (2) something others can’t get the information about without obtaining it from the owner; and (3) kept a true secret by the owner taking active and reasonable measures to protect it from becoming publicly known.

So long as the business secret meets all three elements of the trade secret definition, it is afforded intellectual property rights and thus trade secret protection. Because there is no time limit on the protection a trade secret offers, it can be a strategic decision to opt for trade secret status rather than filing for a patent, which has a limited period of protection.

How does trade secret status protect against misappropriation?

Generally, misappropriation of a trade secret happens in 2 basic ways: where the secret is acquired through improper means, or where someone with authorized access breaches their confidence in sharing the secret with an unauthorized party or using it beyond the scope of their authorization.

When such misappropriation occurs, an injunction is proper to stop any further misappropriation. However, monetary recoveries are also available through a tort action for misappropriation of the trade secret.

Any business seeking to protect the immense value contained in a potential trade secret should be aware of what trade secret status protects and how to reasonably ensure this protection is afforded.

For more information on trade secrets and intellectual property in general, see our trade secret services page.

Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.

This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.

What Does a Trade Secret Protect and Why Is It Important?