A company looking to protect its own trade secrets or manage risk involving others’ trade secrets must first consider whether company information qualifies as a trade secret. Often a threshold issue in litigation, this is also an important question for companies and people to consider when entrusted with access to the information of others.
Most states have adopted a version of the Uniform Trade Secrets Act (UTSA), under which a trade secret is defined as information, including a formula, pattern, compilation, program, device, method, technique, or process, that
- 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
- is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.i
Translated from legalese, under most states’ laws, a trade secret has four basic characteristics:
- It is information, which could include any category of information, although most commonly trade secrets are technical or business information.
- It is secret, meaning not generally known to the public or industry competitors or readily ascertainable by others.
- It is valuable because it is secret. While most company information adds some value for a company, to be a trade secret such information must derive value because others do not know the same information.
- It is subject to reasonable efforts to maintain its secrecy. A trade secret owner cannot merely hope or intend that information remain confidential but instead must take concrete, yet reasonable, efforts to protect and maintain its secrecy.
|The formula for Coca-Cola might be the most famous example of a trade secret. Developed in 1886, the secret formula was first written down in 1919 to use as collateral.ii It was reclaimed in 1925 and placed in a vault, where it has remained ever since.iii|
|WD-40 Company also takes the secrecy of its product’s formula seriously. When the company moved the formula, its CEO rode in an armored car while handcuffed to a briefcase carrying the secret formula.iv To celebrate the company’s 50th anniversary, the CEO again transported the secret formula in armor—this time wearing armor while on horseback.v|
|Google’s search algorithm is another well-known example of a trade secret. Unlike the static formula of Coca-Cola or WD-40, Google updates its algorithm thousands of times a year.vi|
General examples of information often claimed to be trade secrets include the following:
Of course, each piece of information is different depending on its use. Information that might qualify as a trade secret for one company may not be considered a trade secret for another company under different circumstances.
Should I Seek Assistance of Counsel?
If you are considering taking action to identify or implementing steps to maintain the secrecy of your company’s trade secrets, or if you fear one of your trade secrets has been misappropriated, don’t hesitate to contact an attorney specializing in trade secrets.
Perkins Coie is an international leader in trade secrets expertise and is home to dozens of experienced attorneys specializing in trade secrets practice located in offices across the United States and Asia.
Meet our trade secrets team: https://www.perkinscoie.com/en/practices/intellectual-property-law/trade-secrets/index.html.
i Uniform Trade Secrets Act, Unif. L. Comm’n (1985).
ii Coca-Cola’s Formula Is at the World of Coca-Cola, The Coca-Cola Company, https://www.cocacolacompany.com/news/coca-cola-formula-is-at-the-world-of-coca-cola (last visited July 10, 2020).
iv WD-40 Company Enlists Armored Security to Move Top-Secret Formula to New Location, Celebrates 65th Anniversary, Cision PR Newswire (Sept. 12, 2018), https://www.prnewswire.com/news-releases/wd-40-company-enlists-armored-security-to-move-top-secret-formula-to-new-locationcelebrates-65th-anniversary-300711731.html.
v Gwendolyn Bounds, More Than Squeaking By, Wall St. J. (May 23, 2006), https://www.wsj.com/articles/SB114835056149060280.
vi History of Google Algorithm Updates, Search Engine Journal, https://www.searchenginejournal.com/google-algorithm-history/ (last visited July 10, 2020).