A trade secret is a form of intellectual property encompassing confidential business information that gives an enterprise a competitive edge in its industry. This can include formulas, patterns, devices, or compilations of information that are not generally known or reasonably ascertainable by others and by which a business can get an economic advantage over its competitors.
To qualify as a trade secret, the information must be:
1. Secret (not generally known or readily accessible)
2. Commercially valuable due to its secrecy
3. Subject to reasonable efforts by the rightful holder to maintain its secrecy
Examples of trade secrets can range from customer lists and manufacturing processes to marketing strategies and chemical formulas. Unlike patents and other IP, trade secrets are protected without registration, potentially indefinitely, as long as they remain secret.
Legal protection for trade secrets is primarily governed by state law, with most states adopting some version of the UTSA (Uniform Trade Secrets Act). Additionally, the federal Defend Trade Secrets Act of 2016 provides a federal cause of action for trade secret misappropriation.
Misappropriation of trade secrets can lead to significant legal consequences, including injunctions, damages, and, in some cases, criminal penalties. This underscores the importance of businesses implementing robust security measures and confidentiality agreements to protect trade secrets. However, a trade secret loses its protected status if it is independently discovered, reverse-engineered, or publicly disclosed.