Trade Secrets

A trade secret can be any information which is secret, and would give a business an economic advantage over their competitors. One of the best examples of the usefulness and power of having a trade secret is the recipe for Coca-Cola. Coke's flavor is an American icon and has been for 125 years. While many other cola companies have tried, this has never been quite duplicated. Coca-Cola could have gotten a patent on their recipe when they first invented it, but instead chose to keep this as a trade secret. Patents have an end date. Had Coke been patented back in 1886, it would have long ago entered the public domain, and thousands of identical competitors would have sprung up. Another advantage trade secrets have is that they can protect some business matters which patents do not. This includes client lists, pricing information, business strategies, and other such things.

A trade secret is protectable for as long as it remains a secret. This can be potentially forever. Once the secret becomes known in the marketplace, then all rights attached are lost. But, this does not apply where the secret was stolen, or misappropriated in anyway. In order to have a protected trade secret, a company must take 'reasonable efforts' to maintain that secret. One of the best ways to maintain the secrecy of a trade secret is to make anyone who comes into contact with the secret sign a non-disclosure agreement. Also, any employees should also sign a non-compete clause so that they will not be able to leave for a competitor with the secret. But, even without those contracts, there still would be a duty of confidentiality owed to an employer by an employee, and they would be forbidden to turn over trade secrets. The same can be said for attorney client privilege.

One case which illustrates what 'reasonable efforts' includes beyond non-disclosure agreements is Dupont v. Christopher, 431 F.2d 1012 (5th Cir. 1970). There, DuPont was building a chemical factory equipped with some novel, innovative designs. They maintained security guards at the facility. A competitor hired Christopher to fly over the factory in his plane and take pictures. This was public airspace and at the time this type of activity was not illegal. Today, the activities of Christopher would be illegal, through the Federal Economic Espionage Act, 18 U.S.C. §1831-1839. This was passed in 1996, and makes stealing trade secrets illegal. The 5th Circuit ruled that DuPont had taken reasonable precautions to keep their secrets. Maintaining a security force and requiring employees and business associates to sign non-disclosure agreements constitute reasonable efforts. Putting a tarp over the entirety of your chemical plant so as to block out satellites and airplanes is not required to maintain secrecy. The court granted an injunction which permanently forbade the competitor and Christopher from using this information in any way. A court issued injunction requiring a company not to use such information might not seem like much, but it is very effective. Nowhere is that illustrated better than the recipe for Coca-Cola. Two employees once tried to leave Coke for Pepsi, and to take the recipe with them. This was a clear cut case of misappropriation and the court would obviously have granted an injunction. Pepsi knew that the secret recipe would have been of no use to them at all, so they turned down the chance to one-up their arch-rival, and called the FBI to turn in the employees for industrial espionage. Pepsi could, however, legally reverse engineer the recipe, or independently develop the recipe, and face no liability.

For an inventor or businessman who has aggressive competitors, maintaining trade secrets is not as easy as limiting access. To ensure that your proprietary information is qualified as a trade secret, you should contact a qualified attorney. To ensure that the risk of maintaining a trade secret is worth the increased protection as opposed to that of a patent, it is exceptionally helpful to consult an attorney who can tailor the information to suit the needs of your business.