07 / 12 / 2015

What Constitutes a Trade Secret?

The Uniform Trade Secrets Act (UTSA) has been enacted by 40 states and the District of Columbia. Before the UTSA was developed, violation of a trade secret was a common law tort that founded the basic principles that were later adopted by U.S. courts. The following are the six factors that must be considered when deciding whether information constitutes a trade secret:

  1. The extent to which the information is known outside the claimant's business
  2. The extent to which it is known by employees and others involved in the business
  3. The extent of measures taken by the claimant to guard the secrecy of the information
  4. The value of the information to the business and its competitors
  5. The amount of effort or money expended by the business in developing the information
  6. The ease or difficulty with which the information could be properly acquired or duplicated by others

In general, a trade secret can be considered any confidential business information that provides a company with a competitive edge. To be considered a trade secret, the information cannot be commonly known and the holder has to have taken precautionary measures to protect the information. Trade secrets can include, but are not limited to, technical, scientific, manufacturing, industrial, and commercial secrets. The following are examples of things that may be considered trade secrets:

  • Scientific formulas
  • Manufacturing methods
  • Product specifications or designs
  • Computer code
  • Customer lists
  • Customer buying preferences
  • Customer contact information
  • Pricing information
  • Marketing plans
  • Internal cost structure
  • Supplier arrangements

These items, along with other similar non-public information can be protected. The unauthorized use of such information by someone who is not the owner is considered unfair practice and a violation of the trade secret. While a final determination of what information actually constitutes a trade secret depends on the specific circumstances in each unique case, unfair practices in respect to secret information include industrial or commercial espionage, breach of contract, and breach of confidence.

To find out more about trade secret protection or to seek litigation, please contact one of our business attorneys today and we’ll be happy to help you out right away.

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