A trade secret is a valuable asset that helps a business protect its competitive edge. It is information a business wants to keep from its competitors.

There are legal protections in place to protect this type of proprietary information, but understanding the core concepts of trade secrets will help businesses safeguard their information and maintain their market position.

What is a Trade Secret?

A trade secret is any form of confidential information that isn’t known or ascertainable by others but has economic value for the business. It’s a broad definition because a trade secret can be many things, perhaps a formula, pattern, device or tactic. Typically, it’s the data the business uses to gain an advantage over its competitors.

The key characteristics of a trade secret are:

• confidentially: the information isn’t known or easily discoverable
• economic value: the holder stands to gain financially
• efforts to maintain secrecy: the holder has made reasonable efforts to protect the secret

Trade secrets are used by businesses and organizations in almost every field. Consequently, trade secrets take on many forms. For instance, a trade secret might be:

• a chemical formula or recipe
• algorithms and code
• customer lists
• marketing strategies
• financial data
• business plans
• research and development information

Some trade secrets eventually come to light and more are revealed once they are no longer lucrative or useful. Google’s search algorithm is a good example. Essentially, a set of rules, the algorithm was once a closely guarded secret, no-one knew how Google was ranking its search results. It’s still a mystery but experts have decoded most of it now.

Similarly, the WD-40 formula is another example. However, just the formula was revealed, not the exact composition of the lubricant which is still a trade secret to all but a few employees.

Understanding Legal Framework for Trade Secret Protection

Before opting for trade secret protection, it is vital to learn about different legal frameworks. These frameworks define how trade secret holders can take action to seek remedies for misappropriation.

Uniform Trade Secrets Act (UTSA)

This US Act provides the legal framework that enables trade secret protection. The aim was for legal protection to be uniform across the different states. The UTSA was first published in 1979 and amended in 1985. Now, 48 states, including the District of Columbia, Puerto Rico, and the US Virgin Islands, have a version of UTSA.

Key UTSA provisions include:

• definitions of trade secret and trade secret misappropriation
• remedies for trade secret misappropriation
• the statute of limitations as it applies to trade secrets and taking action
• preservation of the trade secret during legal proceedings

Defend Trade Secrets Act (DTSA)

The Defend Trade Secrets Act (DTSA) compliments state-level provisions for action in cases of trade secret misappropriation. The DTSA was enacted in 2016 and allows holders of trade secrets that have been misappropriated to seek redress through the federal courts.

The most notable features of the DTSA are immunity for whistleblowers, increased damages for malicious misappropriation and, in extraordinary circumstances, ex parte seizure provision.

What Protections Do Trade Secrets Offer to Businesses?

Information becomes protected as a trade secret from the second someone decides it should stay confidential. This sounds a bit loose, but trade secrets are so widespread and varied that they don’t always fall easily into the categories offered by the usual intellectual property protection.

However, trade secrets offer a number of protections to businesses. For instance:

1. Legal Recourse Against Misappropriation:
   Owners can take legal action against the improper acquisition, use, or disclosure of their trade secrets, seeking injunctions and damages.

2. Protection Without Registration:
   Trade secrets do not require formal registration, offering businesses a cost-effective form of protection.

3. Broad Scope of Protection:
   Trade secrets can protect a wide variety of information, such as technical data, business strategies, customer lists, and manufacturing processes.

4. Criminal Penalties:
   In some jurisdictions, the theft of trade secrets is considered a criminal offense and can result in prosecution.

5. International Protection:
   Trade secret laws exist in many countries, enabling businesses to protect their trade secrets on a global scale.

However, it is important to bear in mind that there is no protection available to keep someone from reverse engineering or discovering the information independently. Also, the information loses its protected status once it becomes public.

Furthermore, trade secrets are different from many other forms of intellectual property, especially patents and copyrights. The biggest difference is about the expiry date. So, how long does trade secret protection last? Unlike patents or copyrights, trade secrets have no expiry date. They last as long as the secret can be kept, as with Coca-Cola. They don’t need to be declared or registered in any way. Incurring no administrative costs, they don’t tend to get recorded and this helps preserve the information further. Some other differences include the following:

Duration:

• Trade Secrets: Potentially indefinite, as long as the information remains secret.
• Copyrights: Generally, the life of the author plus 70 years.
• Patents: 20 years from the filing date.

Disclosure:

• Trade Secrets: Must be kept secret to retain protection.
• Copyrights: Some public registration is required (with certain exceptions).
• Patents: Public disclosure is required.

Protection Against:

• Trade Secrets: Protection against misappropriation (e.g., theft or improper disclosure).
• Copyrights: Protection against copying and unauthorized distribution.
• Patents: Protection against unauthorized making, using, or selling of the patented invention.

Registration:

• Trade Secrets: Not required.
• Copyrights: Recommended, though not always required.
• Patents: Registration is required to obtain protection.

Understanding More about Trade Secret Misappropriation and Legal Remedies

Trade secret misappropriation occurs when the information is disclosed, acquired or used without the holder’s consent or permission. Misappropriation incorporates a range of crimes, including theft, bribery, misrepresentation, breach of duty and espionage.

In legal disputes, three key factors need to be established.

• The existence of the trade secret.
• The holder’s ownership of the trade secret.
• The defendant’s improper disclosure, acquisition or use of the trade secret.

There are several legal remedies. Courses of action include using injunctions to prevent further disclosure or use, monetary damages in lieu of unjust enrichment or actual losses, reasonable royalties (where applicable) and occasionally, attorney fees.

The Role of Expert Witnesses in Trade Secret Litigation

Expert witnesses bring their specialist knowledge into the courtroom to support or challenge the claims made in trade secret misappropriation cases. ForensisGroup has a vast network of experts to call on. They have been brought together over the course of three decades to offer the courts reliable testimony and valuable insights.

For example, a petroleum engineering expert proves valuable in cases regarding the misappropriation of manufacturing processes within an industry. Their testimony helps the court understand the monetary value of the process and the impact its disclosure would have on the market.

Our expert witnesses come from many fields, and in trade secret misappropriation cases can assist in:

• identifying and defining trade secrets
• determining the economic value of a trade secret and quantifying damages
• evaluating measures to protect the trade secret and its effectiveness
• analyzing evidence

Witness the Benefits of Hiring an Expert Witness through ForensisGroup

Choosing the right expert witness can make all the difference to a case, especially in complex trade secret litigation.

The ForensisGroup experts are vetted extensively to make absolutely sure they have the qualifications, real-world experience and credibility they need to be called to give expert testimony in court.

The right choice of expert will strengthen your trade secrets case, increasing the likelihood of a favorable outcome. At ForensisGroup, there’s support throughout the engagement process, from the initial selection to the final preparations ready for the trial. Fill out the form to hire the best trade secret expert witness for your case!