The first assertions of trade secret rights are reported to be in England in the sixteenth century. In the United States, the first United States case was in Massachusetts in 1868.

When Do You Have a Trade Secret?

Most states have adopted some form of the Uniform Trade Secret Act (UTSA). The UTSA sought to provide some consistency in trade secret law that, until recently, was protected only by state laws. The Act defines a trade secret as:

“ information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

When you have information that has economic value as a result of its secrecy and you use reasonable efforts to keep it secret, you have a trade secret. There is no registration of trade secrets.

There is now also federal protection of trade secrets under 18 USC 1832 that defines and protects trade secret use, copying and theft in similar fashion to the UTSA.

A good example of a trade secret is the recipe for Coca Cola.

What’s Required to Have a Trade Secret?

In order to keep the trade secret status of information, you must keep it secret.

For example, if you wanted to maintain trade secret protection of the code for your website, you would have to program the pages so that the “view source" option would not allow Internet users to freely view the code.

Other steps to take would be using confidentiality agreements to maintain its secrecy in business deals and discussion, allowing only employees who must know the information to have access to it, and keeping the information in a secured environment.

When Do You Have When You Have a Trade Secret and Is There Any Risk?

Having a trade secret means that you have a legal cause of action for damages, or an injunction to stop the use, if another party steals, copies or uses your trade secret without your permission.

The risk to maintaining trade secret protection is that you do not take advantage of other forms of intellectual property protection such as patent and copyright that require registration and disclosure. Patent, upon granting of your application, requires full disclosure of the information patented. Copyright registration recognizes some trade secret protection and permit abbreviated registrations for some items, such as computer programs. In addition to missing these other intellectual property protections, the registration process provides proof of your ownership of the material as of the registration date.

In most intellectual property cases, the other party claims that he or she, in fact, created or used the item or information first and that your use is unauthorized. Therefore, it will be necessary to prove that you originally created and owned the trade secret.

It is vital to maintain dated proof of creation of your trade secret. You can do this cheaply by mailing the information to yourself and retaining the postmarked, sealed envelope. Alternatively, you can deposit a copy of the information with a source code escrow company that would maintain a dated copy of the information in storage.