What is a trade secret?

Intellectual property protection exists so creators have control over their work after they share it. Learn what's at stake and how to safeguard your intellectual property and your success.

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by Boni Peluso
updated May 11, 2023 ·  3min read

Trade secrets are protected intellectual property, and with appropriate protection, you can enforce a trade secret like you would a patent or copyright.

With business markets becoming more global every day, it's more critical that you know the importance of your intellectual property so it can be protected.

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What is a trade secret?

trade secret can be a practice or process that gives your company a distinct advantage over your competition. It's important to understand that not all secrets are worthy of being designated a trade secret. According to the United States Patent and Trademark Office (USPTO), information is legally considered a trade secret if it meets these three criteria:

  • The information has either actual or potential independent economic value because it's not generally known to the public.
  • It has value to others who cannot obtain that information legitimately.
  • Reasonable efforts are taken to ensure this information is kept secret.

What are some examples of trade secrets?

The formula for Classic Coke, which is locked away in a vault, is a famous trade secret. So is Google's search algorithm. But a trade secret designation can also extend to intellectual property like:

  • manufacturing techniques
  • recipes/ingredients
  • client lists
  • R&D information
  • inventions
  • marketing strategies.

What are the key differences between a trade secret and a patent?

There are a few aspects you should understand as you consider types of protection.

  • Unlike a trade secret that can be kept under lock and key indefinitely, when you patent an invention, that information is made public. The patent owner has the right to exclude all others from making, using, or selling that intellectual property for 20 years, but that information is still out there in the open. And once your patent expires, your idea or invention is no longer protected.
  • You actually have to apply for a patent, and it's an expensive process. It involves a lot of paperwork, great technical detail, and examination. It may take years before your patent is awarded.
  • A trade secret is much easier to establish. You don't have to file for protection. There are no government agencies overseeing them or hassles with compliance. The trade secret designation takes effect immediately. You just have to keep it a closely guarded secret.

Many people wonder if you can actually patent a trade secret. Here's what to consider: Under trade secret law, the definition of protectable information is very broad, but if you're considering patent protection, there are more limitations. For instance, you can't patent a client list. Some intellectual property owners choose to patent certain aspects of their invention while keeping other aspects a trade secret. How you protect your information depends on your business and analyzing each type of intellectual property protection's applicability and benefits.

What is trade secret law?

At one time, cases of trade secret theft were limited to state courts. Then three pieces of legislation were enacted to strengthen the protection of trade secrets. And now, you can seek damages in federal court.

  • The Uniform Trade Secrets Act (UTSA), first published in 1979 and amended in 1985, was created to align the different state laws and support companies doing business in several states.
  • The Economic Espionage Act of 1996 covers economic espionage that benefits any foreign government, foreign instrumentality, or foreign agent. It also criminalized the theft of trade secrets for commercial use. These crimes are prosecuted by the Department of Justice and are punishable by imprisonment and/or fines.
  • The Defend Trade Secrets Act (DTSA), enacted by Congress in May 2016, amended the Economic Espionage Act to provide a civil cause of action for the theft of a trade secret. It doesn't preempt existing state trade secret law but gives trade secret owners the option of state or federal venues.

When it comes to trade secrets, here's the bottom line. Some competitors will find it easier and more profitable to steal your information than spend the time and money in research and development trying to develop their own. And some unscrupulous employees may be tempted to steal your intellectual property to sell it to the highest bidder. So you must take the necessary precautions to safeguard your valuable trade secrets to protect your business and your profits.

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Boni Peluso

About the Author

Boni Peluso

Boni Peluso is an award-winning Creative Director and Content Strategist who has written extensively for the legal, heal… Read more

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.