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Trade secret


Trade secret
Intellectual property law
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A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers.[2] In some jurisdictions, such secrets are referred to as "confidential information", but are generally not referred to as "classified information" in the United States, since that refers to government secrets protected by a different set of laws and practices. It has been theorized that the doctrine of trade secrets should protect competitively valuable, personal information of company executives, in a concept known as €executive trade secrets•.[2]

law. Legal protections include non-disclosure agreements (NDA) and non-compete clauses. "A trade secret. € Is the subject of reasonable efforts to maintain its secrecy. Violation of the agreement generally carries the possibility of heavy financial penalties. € Confers some sort of economic benefit on its holder (where this benefit must derive specifically from its not being publicly known. The lack of formal protection. as well as technological and legal security measures.Trade secret 2 Definition The precise language by which a trade secret is defined varies by jurisdiction (as do the particular types of information that are subject to trade secret protection). owners of trade secrets seek to protect trade secret information from competitors by instituting special procedures for handling it. an employee may sign an agreement not to reveal his or her prospective employer's proprietary information. These penalties operate as a disincentive to reveal trade secrets. Instead. A holder of a trade secret may also require similar agreements from other parties he deals with. under U. and (3) which derives independent economic value from not being publicly known".[3] By comparison. However. proving a breach of an NDA against a former employee who is legally working for a competitor can be very difficult.•‚•1839 [4](3) (A). However. has three parts: (1) information. however. although subject to differing interpretations. The law of protection of confidential information effectively allows a perpetual monopoly in secret information . are common to all such definitions: a trade secret is information that: € Is not generally known to the public.S. as defined under 18 U. there are three factors that. not just from the value of the information itself). including only restraint that is reasonable in geographic and time scope).C.[5] Protection Trade secrets are by definition not disclosed to the world at large. An employee may also surrender or assign to his employer the right to his own intellectual work produced during the course (or as a condition) of employment.S. In exchange for an opportunity to be employed by the holder of secrets. A company can protect its confidential information through non-compete and non-disclosure contracts with its employees (within the constraints of employment law. . (B) (1996). such as vendors or licensees. (2) reasonable measures taken to protect the does not expire as would a patent. means that a third party is not prevented from independently duplicating and using the secret information once it is discovered. These three aspects are also incorporated in the TRIPS Agreement in Article 39.

and potentially unlawful methods including industrial espionage on the other. which the Roman jurists used to grant commercial relief under the guise of private law actions. the University of Georgia Law School professor Alan Watson argued in Trade Secrets and Roman Law: The Myth Exploded that the actio servi corrupti was not used to protect trade secrets p. at 19. which lasts only for a specific period of time. The actio servi corrupti presumably or possibly could be used to protect trade secrets and other similar commercial interests. . (The holder of the trade secret is nevertheless obliged to protect against such espionage to some degree in order to safeguard the secret. Thus if a trade secret has been acquired via industrial espionage. has no patent for its formula and has been very effective in protecting it for many more years than the twenty years of protection that a patent would have provided.•[8] The suggestion that trade secret law has its roots in Roman law was introduced in 1929 in a Columbia Law Review article called €Trade Secrets and the Roman Law: The Actio Servi Corrupti•. . . . Rather. . interpreted as an €action for making a slave worse• (or an action for corrupting a servant). in principle. The importance of that illegality to trade secret law is as follows: If a trade secret is acquired by improper means (a somewhat wider concept than "illegal means" but inclusive of such means).Trade secret 3 Secret formulae are often protected by restricting the key information to a few trusted individuals. a trade secret is not deemed to exist unless its purported holder takes reasonable steps to maintain its secrecy. which has been reproduced in Schiller's. . Famous examples of products protected by trade secrets are Chartreuse liqueur and Coca-Cola. See Trade Secrets and Roman Law: The Myth Exploded. its acquirer will probably be subject to legal liability for acquiring it improperly. The Roman law is described as follows: [T]he Roman owner of a mark or firm name was legally protected against unfair usage by a competitor through the actio servi corrupti. As noted above.) History Roman law Commentators starting with A. whereas patent has a guaranteed time of protection in exchange for disclosing the information to the public. at .[6] Protection of trade secret can. the secret is generally deemed to have been misappropriated. . An American Experience in Roman Law 1 (1971). Coca-Cola refused to reveal its trade secret under at least two judges' orders. €If. That was not its purpose and was. €actio servi corrupti•. Acts of industrial espionage are generally illegal in their own right under the relevant governing laws. for example. as the writer believes [writes Schiller]. various private cases of action were available in satisfying commercial needs. extend indefinitely and therefore may provide an advantage over patent protection. for example. 19. Arthur Schiller assert that trades secrets were protected under Roman law by a claim known as. under most trade secret regimes. he explained: Schiller is sadly mistaken as to what was going on. In fact.[7] The disadvantage is that there is no protection once information protected as trade secret is uncovered by others through reverse engineering. However. Coca-Cola. Green Chartreuse liqueur protected by confidential information of the ingredients Misappropriation Companies often try to discover one another's trade secrets through lawful methods of reverse engineering or employee poaching on one hand. the state was acting in exactly the same fashion as it does at the present day.

In 1939.Trade secret most.) Commonwealth jurisdictions In Commonwealth common law jurisdictions.S. Kewanee Oil Co. however.•‚•1832 [18] . but there is no evidence they were.[9] and in the United States in 1837 in Vickery v. But there is not the slightest evidence that the action was ever so used. The Court of Appeal of England and Wales in the case of Saltman Engineering Co Ltd v.[citation needed] Current regulation United States Although trade secrets law evolved under state common law. only four states‚Massachusetts.•‚•1831(a) [17]. an incidental spin-off. prior to 1974. A. the question of whether patent law preempted state trade secrets law had been unanswered. It is bizarre to see any degree the Roman actio servi corrupti as the counterpart of modern law for the protection of trade secrets and other such commercial interests.N. Clark (Engineers) Ltd:[20] € The information itself must have the necessary quality of confidence about it. which served as the primary resource until the latter part of the century. etc. be used to protect trade secrets. confidentiality and trade secrets are regarded as an equitable right rather than a property right (with the exception of Hong Kong where a judgment of the High Court indicates that confidential information may be a property right). Exactly the same can be said of many private law actions including those for theft.. the American Law Institute issued the Restatement of Torts.•which resolved the question in favor of allowing the states to freely develop their own trade secret laws. damage to property. The first. Welch. New Jersey. (The statutory penalties are different for the two offenses. This law contains two provisions criminalizing two sorts of activity. states adopted the Uniform Trade Secrets Act•(UTSA). As of 2013. In 1974. v. Campbell Engineering Ltd[19] held that the action for breach of confidence is based on a principle of preserving "good faith".The second. rather. Bicron Corp. € There must be an unauthorized use of that information to the detriment of the party communicating it. 4 19th century Trade secret law as we know it today made its first appearance in England in 1817 in Newbery v James. and production of property. New York. .C. € That information must have been imparted in circumstances imparting an obligation of confidence.C. which makes the theft or misappropriation of a trade secret a federal crime. Blanchard.[12] while in the United States. the United States Supreme Court issued the landmark decision. neither involved injunctive relief.[10][11] While those cases involved the first known common law causes of action based on a modern concept of trade secret laws.. criminalizes the theft of trade secrets to benefit foreign powers.[13][14] Trade secrets law continued to evolve throughout the United States as a hodgepodge of state laws. In England.S.S. it took until the 1866 case Taylor v. they involved damages only. and Texas‚still rely on the Restatement as their primary source of guidance (other than their body of state case law). In this regard the actio servi corrupti is not unique. with approximately 47 states having adopted it as the basis for trade secret law. Another significant development is the Economic Espionage Act of 1996 (18 U. which was further amended in 1985. 18 U. The test for a cause of action for breach of confidence in the common law world is set out in the case of Coco v. I suppose. criminalizes their theft for commercial or economic purposes. deposit. containing a summary of trade secret laws across states.[15] In 1979 several U.S. 18 U. All of these could.•‚‚•1831 [16]ƒ1839 [4]). the first case involving injunctive relief came in 1820 in Yovatt v Winyard.C.

trade secrets are protected under state laws.) Comparison with patents To acquire a patent. competitors can usually obtain trade secrets.[23] Virtually all . is that trade secret is protected only when the secret is not disclosed. except for Massachusetts. the information remains a trade secret and generally remains legally protected. Assuming the mark in question meets certain other standards of protectibility. One popular misconception held by many is that trade secret protection is incompatible with patent protection.) Registration may be required in order to file a lawsuit for trademark infringement. and additional information will be learned. one must simply use the mark "in commerce". and. It is typically said that if you apply for a patent you can no longer maintain a trade secret on the invention. It is for this reason that trade secret owners shred documents and do not simply recycle them. Other nations have different trademark policies and this information may not apply to them. One of the differences between patents and trademarks. the Lanham Act and Patent Act. What is typically not appreciated though is that the critical time for satisfying this disclosure requirement is at the time the application is filed. so long as the owner of the trade secret can prove that reasonable efforts have been made to keep the information confidential. improvements will be made to an invention even after filing of the patent application.[21] It is possible to register a trademark in the United States. both trademarks and patents are protected under federal statutes. However. if you have any preferences you must likewise disclose your preferences. on the one hand. In many if not most situations. even if the information is obtained by competitors illegally. competitors can copy the method or product legally. a trademark enjoys no protection (qua trademark) until and unless it is "disclosed" to consumers. law. (Registration of trademarks confers some advantages.[citation needed] A successful plaintiff is entitled to various forms of judicial relief. and trade secrets. respectively.[22] It is true that in order to obtain a patent you must disclose your invention so that others will be able to both make and use the invention. None of this additional information must be disclosed and can instead be kept as a secret. risk losing the trade secret. to obtain a patent in the United States. but it is not required in order to get protection. Conversely. until the mark is actually made public. With sufficient effort or through illegal acts (such as break and enter). will then be available to all.Trade secret The "quality of confidence" highlights that trade secrets are a legal concept. including stronger protection in certain respects. but this is an oversimplification. full information about the method or product has to be supplied to the patent office and upon publication or issuance. on the other. (Similar considerations apply to service marks and trade dress. New York. and North Carolina. however. Specifically. After expiration of the patent. trade secret owners who cannot evidence reasonable efforts at protecting confidential information. for only then are consumers able to associate it with a supplier or source in the requisite manner. The temporary monopoly on the subject matter of the patent is regarded as a tradeoff for thus disclosing the information to the public. Comparison with trademarks To acquire rights in a trademark under U. both at the federal and state levels. including: € An injunction € An account of profits or an award of damages € A declaration 5 Comparison to other types of intellectual property law In the United States. it is protected from infringement on the grounds that other uses might confuse consumers as to the origin or nature of the goods once the mark has been associated with a particular supplier.) By definition.S. trade secrets are not protected by law in the same manner as trademarks or patents. and most states have enacted the Uniform Trade Secrets Act (UTSA). Instead. (That a company plans to use a certain trademark might itself be protectible as a trade secret.

v. pdf) [6] Leon Stafford for The Atlanta Journal-Constitution Dec. the advantages of trade secrets are that a trade secret is not limited in time (it "continues indefinitely as long as the secret is not revealed to the public".S. L. [9] Newbery v.S. 10-1103. ajc. does not require compliance with any formalities. L.F. 61 Stan. edu/ uscode/ 18/ 1831. cornell.Trade secret patent licenses include clauses that require the inventor to disclose any trade secrets they have. cornell. Ch. Georgia-Pacific Corp. 94 S. (1948) 65 P. 527 (1837) [11] See The Surprising Virtues of Treating Trade Secrets as IP Rights. 456 [8] Alan Watson. 94 S. LLC constituted that MySpace profiles could be held as trade secrets. 203 . Rev. 10-1275.2d 315 (1974) [16] http:/ / www. justice.. 425.2d 315 (1974) (trade secret law imported into the United States from England in 1868 in Peabody v. Blanchard. Papermaster (No. before disclosing any secrets not already protected by an issued patent you should use a non-disclosure agreement.. gov/ usao/ eousa/ foia_reading_room/ usab5705. Winyard. v. Digital Computer Controls. php?title=Template:Intellectual_property& action=edit [2] Lin. 40 L. Rep.) [13] Taylor v. if you are attempting to sell or license your patent rights you want to make sure that you take steps to continue to maintain your trade secrets as secrets. Inc.6. Norfolk. 452 (1868)) [15] Kewanee Oil Co. 2010ƒMarch 11. L. (1817) 2 Mer. Eur. Nos.S. com/ abstract=2047462 [3] http:/ / www. com/ news/ business/ coke-hides-its-secret-formula-in-plain-sight-in-wo/ nQPMm/ ) [7] For God. 1892 n. € Du Pont de Nemours and Company v. 416 U. htm [4] http:/ / www. 1879. but see Kewanee Oil Co. Bicron Corp. Frequently it is this information not disclosed in the patent that is the most commercially viable.7. 1013 (Ct. 95 Mass. trade secrets case involving Kevlar fiber. html [5] Common Issues and Challenges in Prosecuting Trade Secret and Economic Espionage Act Cases. 87 Notre Dame Law Review 911 (2012). 446. Accordingly. Kolon Industries Incorporated. 35 Eng.2d 433 (Del. cornell. 26. Bicron Corp. € Rivendell Forest Prods. html#a [18] http:/ / www. Attorneys' Bulletin. Compared to patents. 61 Stan. Welch. at 315 & n. Dist): Mark Papermaster moving from IBM to Apple computer in 2008. Thus.R. p. 6 Cases € Data General Corp. (19 Pick.S. cornell. 40 L. W. 11 Tul. 2nd Ed. whereas a patent is only in force for a specified time. 2011. edu/ uscode/ 18/ 1839. 493 n. 36 Mass. 426 (Ch. 2008 U. v. edu/ uscode/ 18/ 1832. org/ w/ index. "others may obtain patent protection for legally discovered secrets". Country & Coca-Cola.Ed. U. wikipedia. 19 (1996). Ch. U.Ct. law. 297 A. Available at SSRN: http:/ / ssrn. resulting in award to DuPont of ~US$920 million. 2012).Ed. 28 F. html [17] http:/ / www.. has an immediate effect. Argued Oct. Beatport. html [19] Saltman Engineering Co Ltd v. org/ english/ tratop_e/ trips_e/ t_agm0_e. 8. v. Rev. € IBM v. & Civ. a trade secret does not imply any registration costs.3d 1042: trade secrets and software systems. 98 Mass. Rep. 470. Intel Corp.23. after which others may freely copy the invention). Tom C. (13 Allen) 370 (1866) [14] See The Surprising Virtues of Treating Trade Secrets as IP Rights.23. 19.. (http:/ / www. Trade Secrets and Roman Law: The Myth Exploded. € Silvaco Data Systems v. law. 1011.) 523. James. wto. at 7 (Nov.S. (1820) 37 Eng. at 315 & n. by Mark Pendergrast. The disadvantages of trade secrets include that "others may be able to legally discover the secret and be thereafter entitled to use it". 470.C. [12] Yovatt v. 2009). Basic Books 2000. otherwise they will be lost. and does not imply any disclosure of the invention to the public.Ct. addressed the question of whether possession of software object code can result in misappropriation of trade secrets € Christou v. 1817) [10] Vickery v. and a trade secret is more difficult to enforce than a patent. Notes [1] http:/ / en. edu/ uscode/ 18/ 1831. 2011 Coke hides its secret formula in plain sight in World of Coca-Cola move (http:/ / www. 1971): protection and disclosure of design documents. 08-9078.. Court of Appeals for the Fourth Circuit. Executive Trade Secrets (April 28. law.. 1879. 416 U. law. Campbell Engineering Ltd.

com/ books?id=jCEP2MUCIKAC&pg=PA436&dq=trade+secret&lr=&as_brr=3& ei=9GQxSqypHKGWyATMwMWIBg#PPA433. American Bar Association. google. ISBN•978-0-471-44998-0. gov/ main/ faq/ index. ISBN•978-1-58852-087-6.htm) by Karen A. org/search?fq=x0:jrnl&q=n2:0385-8863) € Economic Espionage and Trade Secrets (http://www. Business torts & unfair competition.M1).M1).cfm?product_code=2040302B00). htm#sect2165.M1). "25.M1) € "Chapter 7: Misappropriation of Trade Secrets" (http://books. html) [22] Jorda on Trade Secrets (http:/ / www. MCLE. ISBN•978-1-57073-294-2. General Questions (http:/ / International guide to pg=PA167&dq=federal+preemption&lr=&as_drrb_is=q&as_minm_is=0&as_miny_is=&as_maxm_is=0& as_maxy_is=&as_brr=3& 231 . Inc. Ellins. (1969) R. com/ 2008/ 04/ patenttrade_secret_complementa. html) by Karl Jorda [23] Considerations Relevant to Best Mode (http:/ / www.P.238 (2011). 1996. Baker.myersbigel. 1996. dq=trade+secret&lr=&as_brr=3&ei=IGUxSqLPFoGEzQSTxtmvDg#PPR7. Greenwood Publishing ei=9GQxSqypHKGWyATMwMWIBg#PPA283. google. (2005).M1). The Law of Unfair Business 7 Further reading € Eiichiro Kubota: Protection of Trade Secrets in books?id=IeArmjaozd4C& ISBN•1-57589-291-X. ISSN• 0385-8863 (http://www. Magri.M1). "Chapter 13: Trade Secrets and Confidential Commercial Information" (http://books. Aspen Publishers Nature of a Trade Secret" ( books?id=1xS3AAAAIAAJ&pg=PA437&dq=trade+secret&ei=pmQxSvCOBpG-zASjraC2Dg#PPA418. Attorneys' Bulletin (2009). ISBN•978-1-59031-485-2. Discovery from Current and Former Employees. jordasecrets. (2006). A.M1). 1909. Howard A. pdf). (Journal of International Association for the Protection of Intellectual Property of Japan) 36(5). € International Aspects of Trade Secrets Law (http://www.Wikipedia:Link rot € "Chapter 15: Trade Secrets and Confidential Relations" (http://books. 01) MPEP books-catalog. Clark (Engineers) Ltd. 2004.S.justice. "Chapter 8: Trade Secrets and Business Strategy" (http://books.P.Trade secret [20] Coco v. € Epstein on intellectual property (http://books.mcle.M1). 41 at 47 [21] United States Patent and Trademark Office. ISBN•978-0-7355-0319-9. € "Chapter 4: Misappropriation of Trade Secrets (Massachusetts focused)" (http://www. € Protecting trade secrets under the Uniform Trade Secrets Act (http://books. Susan J. (chapter by Russell Beck). uspto. (2004). Corporate Privileges and Confidential Information. Intellectual property law for engineers and scientists. € Rockman. € Snider.. . American Bar Association. Howard B. ISBN•978-1-56720-016-4. U. Intellectual Property Practice. Law Journal Press. Jerome G.C. as_brr=3&ei=IGUxSqLPFoGEzQSTxtmvDg#PPA59.N. ISBN•978-1-59031-333-6. € Becker. uspto. € "Trade Secrets" (http://books. 2004. Wiley-IEEE. American Bar Association. gov/ web/ offices/ pac/ mpep/ documents/ 2100_2165_01.

gov/news/stories/2012/ november/teaching-industry-how-to-protect-trade-secrets-and-national-security/ teaching-industry-how-to-protect-trade-secrets-and-national-security?utm_campaign=email-Immediate& utm_medium=email&utm_source=fbi-top-stories&utm_content=156986).fbi.Trade secret 8 External links € Teaching industry how to protect trade secrets and national security (http://www. FBI .

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