Intellectual Property Primer – Trade Secrets

by admin

Coke trade secretWhat do KFC and Coca Cola have in common?  Besides perhaps being components of a great first date, both companies own famous examples of a trade secret.

Requirements

Trade secret law protects valuable corporate information from being made public.  Formulas, processes, systems, techniques, recipes, and more qualify for trade secret protection. To be considered a trade secret, the information must be:

  1. commercially valuable;
  2. protected from disclosure; and
  3. not general knowledge.

As a general rule of thumb, the more effort a company exerts to keep something a secret, the more likely it will be considered a trade secret.

How to Protect Your Trade Secret

Entrepreneurs should consider spending some effort trying to keep certain key parts of their business secret through a Confidentiality Agreement, Nondisclosure Agreement, or Employment Contract where appropriate.

Infringement

The Uniform Trade Secrets Act gives the requirements to win a lawsuit on a claim of infringement:

  1. the information had economic value;
  2. the information was not generally known to people with legitimate means to discover the information;
  3. the information was misappropriated; and
  4. the information was guarded in a reasonable manner.

State law varies on how each of these requirements is interpreted.

Does Trade Secret Protection Work for Your Company?

One critical issue for the entrepreneur is whether or not to seek trade secret protection.  Other forms of IP protection grant limited monopoly protection, whereas trade secret protection can last indefinitely, so long as the competition isn’t able to reverse engineer or determine the trade secret.  The decision might come down to whether or not other forms of IP protection are available.  Even if patent or copyright protection is available, there might be a business reason to go with trade secret protection.

Branding

KFC and Coca Cola enjoy legend-status when it comes to their trade secrets.  Whether or not the Colonel’s proprietary blend of 11 herbs and spices is known to the public, the allure of the secret recipe has certainly helped KFC’s brand.  Same for Coke.  Are you in a business where a trade secret can be used to build your brand?

Indefinite Protection

There is another reason why trade secret protection might be preferred.  Remember that patent and copyright protections are temporary.  They will eventually expire.  Trade secrets can theoretically live forever.  If the benefits of trade secret protection outweigh the added cost of guarding your trade secret, then it might make sense to seek trademark protection.

 

 

 

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