Trade Secrets

---

Trade secrets are confidential intellectual properties (IP) protected by their secrecy rather than by a publicly disclosed document with a government agency. Such trade secrets may be disclosed by authorization with confidentiality agreements. Often those who know the secret are required to sign nondisclosure or noncompeting agreements. Trade secrets remain valuable and effective as long as the IP remains confidential. Trade secrets may last forever. Trade secrets provide the owner a competitive advantage. Ideally, only a few people should know a trade secret. In addition, the trade secret should be difficult to reverse-engineer.

Trade secrets are frequently an alternative to patents. Trade secrets do not require novelty to be patentable subject matter or require expression of an idea for copyrightable requirements. Thus, multiple types of IPs could be protected as trade secrets. Specific situations include confidential formulas, business practices and processes, proprietary in-house customer activity lists, and so one. Among the more famous trade secrets are the formula for Coca-Cola® and the search engine algorithms of Google®.

Maintaining and protecting trade secrets has become a challenge with the growth of global commerce and rapid communication via the internet, mobile devices, and cloud data storage. Competitive spying or trade secret theft costs companies millions of dollars in confidential proprietary information losses. Once a trade secret has been illicitly disclosed, its owner loses all protection.

Nondisclosure agreements or confidentiality agreements are frequently used to protect trade secrets within business settings, with parties ranging from internal employees to external licensees manufacturing a product or service protected by a trade secret. A nondisclosure agreement is a legally enforced contract prohibiting an individual from divulging or making use of the invention without permission. If such a contract is violated, that individual may be liable for monetary damages and also legally prevented from using or patenting such an invention.

Laws related to trade secrets differ from patent and copyright laws. Rather than liability for unauthorized use, violators improperly use, acquire, or disclose a trade secret by way of wrongful or unethical conduct, such as theft, fraud, or breach of a confidential agreement. Two legal principles in the United States that help address such infringements are the Uniform Trade Secrets Act and the Economic Espionage Act.

For more, see Nolo's Legal Encyclopedia entry on Trade Secrets. In addition, the USPTO offers a video entitled Trade Secrets by the Global Intellectual Property Academy.  To compare trade secrets to other intellectual properties such as patents, see Types of IP Rights section of this site. 

IMPORTANT NOTICE: Information on this page and other content from the YIP website, programs, or services are provided for informational  purposes only. Any information provided should not be considered legal  advice. YIP seeks only to facilitate related information and  community connections to further IP awareness. Any information received  from YIP should not substitute for securing legal advice from a  licensed attorney.