Trade secrets consist of information and can include a formula, pattern, compilation, program, device, method, technique or process. To meet the most common definition of a trade secret, it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.
As a member of the World Trade Organization (WTO) and a party to the Agreement on Trade Related Aspects of Intellectual-Property Rights (TRIPS), the United States is obligated to provide trade secret protection. Article 39 paragraph 2 requires member nations to provide a means for protecting information that is secret, commercially valuable because it is secret, and subject to reasonable steps to keep it secret.
The Defend Trade Secrets Act of 2016 created federal civil cause of action, strengthening U.S. trade secret protection, with a choice for the parties between localized disputes under state laws or disputes under federal law, heard in federal courts. While state laws differ, there is similarity among the laws because almost all states have adopted some form of the Uniform Trade Secrets Act.
Courts can protect trade secrets by enjoining misappropriation, ordering parties that have misappropriated a trade secret to take steps to maintain its secrecy, as well as ordering payment of a royalty to the owner. Courts can also award damages, court costs, and reasonable attorneys' fees. This protection is very limited because a trade secret holder is only protected from unauthorized disclosure and use which is referred to as misappropriation. If a trade secret holder fails to maintain secrecy or if the information is independently discovered, becomes released or otherwise becomes generally known, protection as a trade secret is lost. Trade secrets do not expire so protection continues until discovery or loss.
Trade secret protection is a complement to patent protection. Patents require the inventor to provide a detailed and enabling disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time. Patents do expire, and when that happens the information contained within is no longer protected.
However, unlike trade secrets, patents may protect against independent discovery. Patent protection also eliminates the need to maintain secrecy. While most anything can be kept secret, there are limitations on what can be protected by a patent. If a given invention is eligible for either patent or trade secret protection, then the decision on how to protect that invention depends on business considerations and weighing of the relative benefits of each type of intellectual property.
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