A trade secret is any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.
The factors involved in determining whether information is a trade secret are:
- How well known the information is outside of one’s business.
- Who within the business knows the information.
- If the business made an effort the keep the information confidential or secret.
- How valuable the information is.
- The investment involved in acquiring the information
- The level of difficulty a competitor would face in duplicating the information.
Employees have a duty not to disclose trade secret information. There are two situations in which this duty arises: an express agreement and an implied agreement.
Express Agreement: An employee and an employer, may have a contractual agreement, typically written, in which the employee agrees to keep revealed trade secret information in confidence and/or agrees to assign all developed trade secret information to the employer. Additionally, an employer may want the employee to sign a non-competition clause, thereby limiting the scope of after employment job opportunities. These non-competition clauses will be enforced if:
- They are reasonably necessary to protect the employer.
- They are reasonable as to time and regional area in which the former employee is restricted
- The restriction does not harm the general public.
- The restrictions are not unreasonably burdensome on the employee.
Implied Agreement : In the absence of an express agreement, an employee has duty not to use or disclose trade secret information revealed to him in the scope of his employment. Additionally, if the employee was hired to develop trade secret information and the employer had provided means to develop the information, then an implied assignment of the trade secret information will be found.
Trade secret infringement
The following are some of situations in which trade secret infringement is found.
- Disclosure or use of a trade secret that is a breach of confidence.
- Disclosure or use of a trade secret learned from a third party with notice that the information is a trade secret.
- Disclosure or use of a trade secret learned by mistake with notice that the information is a trade secret.
- Continued disclosure or use of a trade secret after receipt of notice that the information is a trade secret.
- Disclosure or use of a trade secret acquired through improper means.
- Disclosure or use of a trade secret with notice that the provider acquired it through improper means.
- Modification or improvement on an existing trade secret.
Government Disclosure of a Trade Secrets
Care must be taken when disclosing trade secret information to governments. There are many statutes, such as the Freedom of Information Act, that require government agencies to disclose trade secret information submitted by private parties.
The only way a private party will gain relief from such disclosure is if that party had a reasonable, investment-backed expectation of confidentiality. This expectation is usually only available if there is a statute expressly prohibiting the government agency from disclosing the trade secret.
Remedies for trade Secret Infringement
Injunctions: The disclosure or use of trade secret information may be enjoined.
Damages: Damages may be measured by:
- Profits lost due to the trade secret infringement.
- Royalties for the use of the trade secret information.
- Profits the infringer made from the trade secret infringement.
If a government agency does reveal trade secret information when there is a reasonable, investment-backed expectation of confidentiality, the disclosure can be considered an unconstitutional “taking” with all of the commensurately available remedies.