Jorda on : Definition of a Trade Secret

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There are three common threads in all trade secret definitions. They are three requirements that must be met for enforceable trade secrets to exist. The information must be
  1. a secret in the sense that it is not generally known in the trade,
  2. valuable vis-à-vis the competition that does not possess it and
  3. the subject of reasonable efforts to safeguard and maintain secrecy.
Under the American Uniform Trade Secrets Act (UTSA) of 1985 vintage, now in force in 45 states, a trade secret is defined as follows:
A trade secret is any information, including a formula, pattern, compilation, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
The most widely used definition of a trade secret in the United States is found in the 1929 Restatement of Torts. It reads:
A trade secret may consist of 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. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.

In applying this definition to determine whether a trade secret existed, courts have relied on the following criteria:

  • the extent to which the information is known outside of the business,
  • the extent to which it is known by employees and others involved in the business,
  • the extent of measures taken to guard the secrecy of the information,
  • the value of the information to the business and to competitors, and
  • the ease or difficulty with which the information could be properly acquired or duplicated by others.

The most recent and clearly the broadest and best definition of a trade secret is set forth in the “Restatement (Third) of Unfair Competition, §39 (1995).”

A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.
It is to be hoped that this definition will in time replace the earlier definitions recited above. As of 1996 there is in the United States also a federal criminal trade secret statute, the EEA, Economic Espionage Act (18 U.S.C.A. §§ 1831-1839), with the following definition:
The term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if — (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.

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This page contains a single entry by Jon Cavicchi published on October 2, 2007 11:02 AM.

Jorda on: The Criticality of Trade Secrets in Technology Licensing and Tech Transfer was the previous entry in this blog.

Jorda on : What is and What is not a Trade Secret is the next entry in this blog.

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