Trade Secret Misappropriation

Most are familiar with patents, trademarks, and copyrights. However, there is a fourth type of intellectual property called trade secrets. Trade secrets consist of information that can be a formula, pattern, compilation, program, device, method, technique or process. To be considered a trade secret, it must be used in business, and provide an opportunity to obtain an economic advantage over competitors.

  1. Information is secret

For the information in question to be a secret, it must not be generally known or readily ascertainable to competitors.

  1. Offers a competitive advantage

The information has to offer an economic advantage to the one who possesses it over their competitors. When determining this, courts evaluate:

  • The value the information has to the owner and its competitors
  • How much effort or money has been put into developing the information
  • How seriously the owner tried to keep the information secret
  • How hard it would be for others to obtain the information
  • The degree to which other people have placed this information in the public domain

 

  1. Reasonable efforts were made to keep it secret

The reasonability is determined by a cost-benefit analysis that varies from case to case.

Obtaining another company’s trade secret is cause for them to file a legal claim for misappropriation. When this happens, the court can order the party that misappropriated the trade secret to take steps to maintain its secrecy and order payment of a royalty to the owner. Along with those, the court can also award damages, court costs, and attorney’s fees.

Protection for trade secrets is very limited. The trade holder is really only protected from unauthorized disclosure and use (misappropriation). If the holder fails to maintain secrecy, if the information is independently discovered or if it is released or becomes generally known, that protection is lost.

Some companies use trade secret protection as opposed to patent protection. Trade secret protection does not expire until discovery or loss, while patent protection does expire. However, the benefit of patent protection is that it does protect against independent discovery and therefore eliminates the need to maintain secrecy.

Many things can be kept a secret, making them a good choice for trade secret protection, while there are limitations on what can be protected by a patent. Deciding between the two can be a tough choice for some companies.

If a company registering intellectual property isn’t sure which protection to use, they should consult their in-house counsel. InnovaCounsel attorneys are knowledgeable about intellectual property protection and can help determine which type is best. If a trade secret misappropriation lawsuit comes up, they can manage that as well.  


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