Trade Secret Protection Overview
Among the various protections of intellectual property beyond copyrights, trademarks, and patents, the law of trade secrets is perhaps the most fragile. The realm of trade secrets involves subject matter which cannot be protected within the three major areas of intellectual property law.
Example: Ted is a motorcycle enthusiast who works at the local dealership for a major motorcycle manufacturer, Gnarly-Sellargesum. Years of experience coupled with passion has led Ted to develop a design for a new motorcycle. While no new, useful technology is involved (i.e., there is nothing he could patent), the motorcycle would have a different overall look and feel. He would like to submit the design to the Gnarly-Sellargesum company, but is afraid that once he shows them his diagrams they will simply take his idea and use it as their own. Without someone knowledgeable in the world of intellectual property law, Ted will either be frozen by fear or unnecessarily exposed to the risk that he will be taken advantage of by the more sophisticated party.
As with other areas of intellectual property, there are competing societal interests here. Most people would agree that Ted should be able to prevent the company from stealing his idea after he makes the pitch. On the other hand, we don’t want to give Ted a complete monopoly on this motorcycle design; if someone at another company independently thinks up a similar design, we wouldn’t want to prevent that other company from making the motorcycles.
Recall that with patent law, an innocent party who independently stumbles upon something identical to a patented invention will not be able to make use of her invention; independent creation is not a defense to patent infringement. When an idea falls outside of the reach of patent law (generally because it is not novel, or not useful, or both not novel and not useful) independent creation protects the second-comer. Further, legally obtaining the information will fully protect the second-comer.
With trade secrets, the value is derived from the fact that the secret is not generally known or readily ascertainable. It is the very secrecy of the trade secret which makes it valuable. Once those who could make use of the information gain access to that information, its value to the original holder is lost. When such parties gain access to the information in what we feel is an inappropriate and unfair manner, the impulse is to prevent those parties from profiting from the idea. Consider the following three scenarios:
Car manufacturers today are faced with a serious dilemma somewhat similar to Ted’s. They need to put their new cars to the test by running them on tracks and through simulated driving conditions. At the same time, they do not want other manufacturers to get an early look at the new design, for fear that this would give their competition just that much more time to design a competing vehicle.
The only protection they have, therefore, is to build their testing tracks in highly remote areas and “mask” their new cars to the best of their ability while conducting their outdoor testing. For example, according to www.carpages.co.uk there is a “secret winter test world in a snow-bound venue north of the Arctic Circle” which belongs to Volvo. Certainly, this would qualify as remote!
In most cases, such as the “secret Audi hybrid” which was the subject of a September 20, 2005 article posted on www.theautochannel.com , there is likely patentable technology at play. But the very fact that a certain manufacturer is working on a certain project is valuable in itself. Because competing companies don’t want to be left behind, it is to their advantage to learn as quickly as possible about what new cars are being developed.
Whether designing motorcycles, cars, buildings, boats, pencils, sunglasses, hybrid tomato seeds, or any other product, there is sometimes valuable information which is not protected by any other body of law and which derives its value from the fact that it is not known to others. This is where the law of trade secrets enters the picture.
But beyond product development, trade secrets could include such things as:
When a business takes reasonable measures to maintain the secrecy of valuable information, others who improperly gain access to that information, or anyone who improperly uses or discloses that information, can be held accountable. Note, that the emphasis here is on the improper nature of the event which leads to use or disclosure. Feigning a good faith interest in a partnership and then taking the design as one’s own (scenario "a") would seem to most to be an improper way to gain access to information. Similarly, illegal conduct such as breaking-and-entering (scenario "b") would lead to liability.
What about scenario "c"? This is akin to photographers standing at the border of a car manufacturer’s property waiting to catch a glimpse of the new car. Because this method of access merely takes advantage of information readily ascertainable by the public (anyone standing there could see the thing), trade secret law will not protect the car maker from these prying eyes.
The example of Ted’s motorcycle idea is just one classic conflict in trade secret law: the inventor/idea-developer versus the business. Keeping in mind the vast variety of information which might fall under trade secret protection, other classic scenarios of conflict (adapted from Intellectual Property: Examples and Explanations, Stephen M. McJohn, pp. 291–293, Aspen Publishers 2003) include:
Because trade secrets are valuable property, they are protected by state law in various ways. The most common forms of protection come from state statutes, such as those based on the Uniform Trade Secret Act, and from the law of contracts, insofar as contractual agreements between the parties exist.
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