How can a trade secret be protected by reading the article in a closed box

In order for information to be protected as trade secret, it shall meet the following criteria. The information must be secret (i.e., it is not generally known among, or readily accessible, to circles that normally deal with the kind of information in question). Absolute secrecy is not required. For example, trade secrets can be kept by several parties, as long as it is not known to other persons working in the field. It must have actual or potential commercial value because it is secret. It must have been subject to reasonable steps by the rightful holder of the information to keep it secret (e.g., through confidentiality agreements). While the “reasonable” steps may depend on the circumstances of each case, marking confidential documents, placing physical and electronic restrictions to access trade secret information, introducing a systematic monitoring system and raising awareness of employees are the measures taken to safeguard trade secrets.

Example

A company develops a process for the manufacturing of its products that allows it to produce its goods in a more cost-effective manner. Such a process provides the enterprise a competitive edge over its competitors. The enterprise in question may therefore value its know-how as a trade secret and would not want competitors to learn about it. It makes sure that only a limited number of people know the secret, and those who know it are made well aware that it is confidential. When dealing with third parties or licensing its know-how, the enterprise signs confidentiality agreements to ensure that all parties know that the secret information must not be disclosed. The company should also take reasonable measures to keep the know-how secret, such as putting access control and security measures in place and establishing internal procedures for systematic controlling and monitoring of trade secret information. In such circumstances, the misappropriation of the information by a competitor or by any third party would be considered a violation of the enterprise’s trade secrets. However, such measures will only be effective if the products could not easily be “reverse engineered” by competitors.

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What is a trade secret?

Trade secrets are intellectual property (IP) rights on confidential information which may be sold or licensed.

What qualifies as a trade secret?

In general, to qualify as a trade secret, the information must be:

  • commercially valuable because it is secret,
  • be known only to a limited group of persons, and
  • be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.

The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.

What kind of information is protected by trade secrets?

In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret.

Types of trade secrets

Trade secrets encompass both technical information, such as information concerning manufacturing processes, pharmaceutical test data, designs and drawings of computer programs, and commercial information, such as distribution methods, list of suppliers and clients, and advertising strategies.

A trade secret may be also made up of a combination of elements, each of which by itself is in the public domain, but where the combination, which is kept secret, provides a competitive advantage.

Other examples of information that may be protected by trade secrets include financial information, formulas and recipes and source codes.

What kind of protection does a trade secret offer?

Depending on the legal system, the legal protection of business secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.

While a final determination of whether trade secret protection is violated or not depends on the circumstances of each individual case, in general, unfair practices in respect of secret information include industrial or commercial espionage, breach of contract and breach of confidence.

A trade secret owner, however, cannot stop others from using the same technical or commercial information, if they acquired or developed such information independently by themselves through their own R&D, reverse engineering or marketing analysis, etc. Since trade secrets are not made public, unlike patents, they do not provide “defensive” protection, as being prior art. For example, if a specific process of producing Compound X has been protected by a trade secret, someone else can obtain a patent or a utility model on the same invention, if the inventor arrived at that invention independently.

How can a trade secret be protected?

Companies should take preventive measures to protect trade secrets against theft or misappropriation, including:

  • Non-disclosure agreement (NDA): employees and business partners should sign a non-disclosure agreement that prevent them from disclosing a company’s confidential information.
  • Non-compete agreement (NCA): employers should ask employees, contractors and consultants to sign a non-compete agreement to prevent them from entering in competition when their employment/service agreement ends.
  • Robust IT security infrastructure
  • Controlling the accessibility of important documents

Read the full list of trade secrets FAQs.

A trade secret:

  • is information that has either actual or potential independent economic value by virtue of not being generally known,
  • has value to others who cannot legitimately obtain the information, and
  • is subject to reasonable efforts to maintain its secrecy. 

All three elements are required; if any element ceases to exist, then the trade secret will also cease to exist. Otherwise there is no limit on the amount of time a trade secret is protected.

Protection of trade secrets

The Economic Espionage Act of 1996 criminalizes trade theft under two sets of circumstances. Economic espionage refers to the theft of a trade secret “intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent.” The second offense — the theft of trade secrets — addresses theft “that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret.” These crimes are prosecuted by the Department of Justice and are punishable by imprisonment and/or fines.

The Defend Trade Secrets Act of 2016 (DTSA) amended the Economic Espionage Act to establish a private civil cause of action for the misappropriation of a trade secret. This cause of action provides trade secret owners with a uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country. The DTSA does not preempt existing state trade secret law, thus giving trade secret owners the option of state or federal venues.

U.S. courts can protect a trade secret by (a) ordering that the misappropriation stop, (b) that the secret be protected from public exposure, and (c) in extraordinary circumstances, ordering the seizure of the misappropriated trade secret. At the conclusion of a trade secret case, courts can award damages, court costs, reasonable attorneys’ fees and a permanent injunction, if warranted. 

Trade secrets versus patents

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 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 the definition of protectable “information” is very broad under trade secret law, there are more 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 the relative benefits of each type of intellectual property protection.

Trade secrets resources

 

 

Trade Secrets Video

A three-minute video produced by the USPTO provides a brief, yet informative introduction on what trade secrets are, why you should protect them, how they can impact a business’s bottom line, and their importance as intellectual property.

2017 Trade Secrets Symposium

On May 8, 2017, at the one-year anniversary of the enactment of the Defend Trade Secrets Act of 2016, the USPTO convened a one-day symposium on trade secrets: “Developments in Trade Secret Protection.” Videos of all four panel sessions are available for viewing online.

2015 Trade Secrets Symposium

On January 8, 2015, the USPTO organized a one-day symposium on issues relevant to the protection of trade secrets. Videos of the symposium are available for viewing online.

Defend Trade Secrets Act of 2016

Public law 114-153. Dated May 11, 2016. Read the full text of the law here.

The Defend Trade Secrets Act at Five: The Inevitable Disclosure Doctrine (October 2021)

On the fifth anniversary of the enactment of the Defend Trade Secrets Act of 2016, this paper looks at the relationship between the act and the “inevitable disclosure” doctrine. The doctrine allows a court to enjoin a former employee from working for a competitor because the nature of the new job and the knowledge of the employee makes it inevitable that the trade secrets of the former employer will be disclosed.
 

Definitions. Article means a manufactured item other than a fluid or particle: (i) which is formed to a specific shape or design during manufacture; (ii) which has end use function(s) dependent in whole or in part upon its shape or design during end use; and (iii) which under normal conditions of use does not release more than very small quantities, e.g., minute or trace amounts of a hazardous chemical (as determined under paragraph (d) of this section), and does not pose a physical hazard or health risk to employees.

Assistant Secretary means the Assistant Secretary of Labor for Occupational Safety and Health, U.S. Department of Labor, or designee.

Chemical means any substance, or mixture of substances.

Chemical manufacturer means an employer with a workplace where chemical(s) are produced for use or distribution.

Chemical name means the scientific designation of a chemical in accordance with the nomenclature system developed by the International Union of Pure and Applied Chemistry (IUPAC) or the Chemical Abstracts Service (CAS) rules of nomenclature, or a name that will clearly identify the chemical for the purpose of conducting a hazard classification.

Classification means to identify the relevant data regarding the hazards of a chemical; review those data to ascertain the hazards associated with the chemical; and decide whether the chemical will be classified as hazardous according to the definition of hazardous chemical in this section. In addition, classification for health and physical hazards includes the determination of the degree of hazard, where appropriate, by comparing the data with the criteria for health and physical hazards.

Commercial account means an arrangement whereby a retail distributor sells hazardous chemicals to an employer, generally in large quantities over time and/or at costs that are below the regular retail price.

Common name means any designation or identification such as code name, code number, trade name, brand name or generic name used to identify a chemical other than by its chemical name.

Container means any bag, barrel, bottle, box, can, cylinder, drum, reaction vessel, storage tank, or the like that contains a hazardous chemical. For purposes of this section, pipes or piping systems, and engines, fuel tanks, or other operating systems in a vehicle, are not considered to be containers.

Designated representative means any individual or organization to whom an employee gives written authorization to exercise such employee’s rights under this section. A recognized or certified collective bargaining agent shall be treated automatically as a designated representative without regard to written employee authorization.

Director means the Director, National Institute for Occupational Safety and Health, U.S. Department of Health and Human Services, or designee.

Distributor means a business, other than a chemical manufacturer or importer, which supplies hazardous chemicals to other distributors or to employers.

Employee means a worker who may be exposed to hazardous chemicals under normal operating conditions or in foreseeable emergencies. Workers such as office workers or bank tellers who encounter hazardous chemicals only in non-routine, isolated instances are not covered.

Employer means a person engaged in a business where chemicals are either used, distributed, or are produced for use or distribution, including a contractor or subcontractor.

Exposure or exposed means that an employee is subjected in the course of employment to a chemical that is a physical or health hazard, and includes potential (e.g., accidental or possible) exposure. “Subjected” in terms of health hazards includes any route of entry (e.g. inhalation, ingestion, skin contact or absorption.)

Foreseeable emergency means any potential occurrence such as, but not limited to, equipment failure, rupture of containers, or failure of control equipment which could result in an uncontrolled release of a hazardous chemical into the workplace.

Hazard category means the division of criteria within each hazard class, e.g., oral acute toxicity and flammable liquids include four hazard categories. These categories compare hazard severity within a hazard class and should not be taken as a comparison of hazard categories more generally.

Hazard class means the nature of the physical or health hazards, e.g., flammable solid, carcinogen, oral acute toxicity.

Hazard not otherwise classified (HNOC) means an adverse physical or health effect identified through evaluation of scientific evidence during the classification process that does not meet the specified criteria for the physical and health hazard classes addressed in this section. This does not extend coverage to adverse physical and health effects for which there is a hazard class addressed in this section, but the effect either falls below the cut-off value/concentration limit of the hazard class or is under a GHS hazard category that has not been adopted by OSHA (e.g., acute toxicity Category 5).

Hazard statement means a statement assigned to a hazard class and category that describes the nature of the hazard(s) of a chemical, including, where appropriate, the degree of hazard.

Hazardous chemical means any chemical which is classified as a physical hazard or a health hazard, a simple asphyxiant, combustible dust, pyrophoric gas, or hazard not otherwise classified.

Health hazard means a chemical which is classified as posing one of the following hazardous effects: acute toxicity (any route of exposure); skin corrosion or irritation; serious eye damage or eye irritation; respiratory or skin sensitization; germ cell mutagenicity; carcinogenicity; reproductive toxicity; specific target organ toxicity (single or repeated exposure); or aspiration hazard. The criteria for determining whether a chemical is classified as a health hazard are detailed in Appendix A to § 1910.1200 – Health Hazard Criteria.

Immediate use means that the hazardous chemical will be under the control of and used only by the person who transfers it from a labeled container and only within the work shift in which it is transferred.

Importer means the first business with employees within the Customs Territory of the United States which receives hazardous chemicals produced in other countries for the purpose of supplying them to distributors or employers within the United States.

Label means an appropriate group of written, printed or graphic information elements concerning a hazardous chemical that is affixed to, printed on, or attached to the immediate container of a hazardous chemical, or to the outside packaging.

Label elements means the specified pictogram, hazard statement, signal word and precautionary statement for each hazard class and category.

Mixture means a combination or a solution composed of two or more substances in which they do not react.

Physical hazard means a chemical that is classified as posing one of the following hazardous effects: explosive; flammable (gases, aerosols, liquids, or solids); oxidizer (liquid, solid or gas); self-reactive; pyrophoric (liquid or solid); self-heating; organic peroxide; corrosive to metal; gas under pressure; or in contact with water emits flammable gas. See Appendix B to § 1910.1200 – Physical Hazard Criteria.

Pictogram means a composition that may include a symbol plus other graphic elements, such as a border, background pattern, or color, that is intended to convey specific information about the hazards of a chemical. Eight pictograms are designated under this standard for application to a hazard category.

Precautionary statement means a phrase that describes recommended measures that should be taken to minimize or prevent adverse effects resulting from exposure to a hazardous chemical, or improper storage or handling.

Produce means to manufacture, process, formulate, blend, extract, generate, emit, or repackage.

Product identifier means the name or number used for a hazardous chemical on a label or in the SDS. It provides a unique means by which the user can identify the chemical. The product identifier used shall permit cross-references to be made among the list of hazardous chemicals required in the written hazard communication program, the label and the SDS.

Pyrophoric gas means a chemical in a gaseous state that will ignite spontaneously in air at a temperature of 130 degrees F (54.4 degrees C) or below.

Responsible party means someone who can provide additional information on the hazardous chemical and appropriate emergency procedures, if necessary.

Safety data sheet (SDS) means written or printed material concerning a hazardous chemical that is prepared in accordance with paragraph (g) of this section.

Signal word means a word used to indicate the relative level of severity of hazard and alert the reader to a potential hazard on the label. The signal words used in this section are “danger” and “warning.” “Danger” is used for the more severe hazards, while “warning” is used for the less severe.

Simple asphyxiant means a substance or mixture that displaces oxygen in the ambient atmosphere, and can thus cause oxygen deprivation in those who are exposed, leading to unconsciousness and death.

Specific chemical identity means the chemical name, Chemical Abstracts Service (CAS) Registry Number, or any other information that reveals the precise chemical designation of the substance.

Substance means chemical elements and their compounds in the natural state or obtained by any production process, including any additive necessary to preserve the stability of the product and any impurities deriving from the process used, but excluding any solvent which may be separated without affecting the stability of the substance or changing its composition.

Trade secret means any confidential formula, pattern, process, device, information or compilation of information that is used in an employer’s business, and that gives the employer an opportunity to obtain an advantage over competitors who do not know or use it. Appendix E to § 1910.1200 – Definition of Trade Secret, sets out the criteria to be used in evaluating trade secrets.

Use means to package, handle, react, emit, extract, generate as a byproduct, or transfer.

Work area means a room or defined space in a workplace where hazardous chemicals are produced or used, and where employees are present.

Workplace means an establishment, job site, or project, at one geographical location containing one or more work areas.

Written by Jane