Trade Secrets Basics

First Publication Date: 4th February 2008

What is a trade secret?

Trade secret is any information that has independent economic value because of not being known to others and for which reasonable measures have been taken to protect it as a secret. A secret is a trade secret only if it has legal sanctity. Terms like ‘confidential information’, ‘proprietary information’, ‘undisclosed information’ and trade secret have the same meaning from legal perspective.

What is a reasonable measure?

A measure to protect secrecy of information is considered to be reasonable, if it gives notice about the secret nature of the information and has legal sanctity. Some measures that are recognized by courts to be reasonable are: Non-disclosure agreements, confidentiality agreements, access controls, security measures, marking, clean desk policy and so on.

When is a person liable for trade secret misappropriation?

A person is liable for trade secret misappropriation if that person takes the trade secret through improper means or conduct. Any conduct that arises out of civil, criminal or tortuous acts is considered to be improper. Misappropriation might arise out of a civil act such as a breach of a contract or out of a criminal act such as extortion.

Are there any defences for misappropriation?

A person would not be liable for misappropriation of trade secrets, if he comes up with the trade secret independently or if he discovers the trade secret through reverse engineering. Independent creation and reverse engineering are two valid defences for trade secret misappropriation.

Is registration required for trade secrets?

Trade secret protection does not spring out of registration. It arises out of secrecy and reasonable measures to maintain secrecy. No registration is required for trade secrets.

What is the term of a trade secret?

The term of a trade secret is unlimited. Theoretically, a trade secret can exist as long as it can be maintained confidential. The formulation of coca cola is being maintained as a trade secret for more than hundred years.
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