What is a Trade Secret?

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.  In some jurisdictions, such secrets are referred to as "confidential information" or "classified information".

• A trade secret is commonly defined as any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." RESTATEMENT OF TORTS § 757, Comment b (1939).

The subject matter of trade secrets is usually defined in broad terms and includes sales methods, distribution methods, consumer profiles, advertising strategies, lists of suppliers and clients, recipes and manufacturing processes.  While a final determination of what information constitutes a trade secret will depend on the circumstances of each individual case, clearly unfair practices in respect of secret information include industrial or commercial espionage, breach of contract and breach of confidence.  Inventions and processes that are not patentable can be protected under trade secret law.  There are several factors used to determine if subject matter qualifies as a trade secret.  Among the factors considered are the extent of measures taken by the trade secret owner to guard the secrecy of the information and the ease or difficulty with which the information could be properly acquired or duplicated by others.  Based on these considerations, the general rule is that subject matter cannot be successfully protected as a trade secret if it is widely distributed.  However, if adequate security precautions are taken to ensure that access to the subject matter being distributed is treated as secret, the subject matter may still be considered a trade secret.

Trade Secrets are Protected by State Law

Unlike many of the other forms of intellectual property protection, trade secrets are protected by state law, not Federal law.  Patent applicants generally rely on trade secret law to protect their inventions while the patent applications are pending.