What Is a Trade Secret?
Trade secret law is a source of protection for intellectual property that serves as an alternative to patent, copyright, or trademark law. While patent, copyright, and trademark law require that the intellectual property sought to be protected be publicly “disclosed” (for example, through a patent application), trade secret law requires precisely the opposite -- that is, that the intellectual property sought to be protected not be publicly disclosed. Indeed, the subject matter of a trade secret may be virtually any information that is of value as a result of not being generally known. Unlike copyright and patent law, there is no formal requirement of “novelty” or “tangibility” under trade secret law. Rather, trade secret protection is extended to information that has independent economic value by virtue of not being generally known or readily ascertainable by others and with respect to which reasonable efforts have been made to avoid public disclosure.
Pennsylvania recently became the 43rd state to adopt the Uniform Trade Secret Act. This Act, in part, codifies and expands the definition of what constitutes a trade secret under Pennsylvania law. In order to qualify as a trade secret under the new Act, the information sought to be protected must meet the following definition: Information, including a formula, drawing, pattern, compilation (including a customer list) program, device, method, technique or process test that:
- derives independent economic value, actual or potential, from not being generally known to others; and
- is not readily ascertainable through proper means by others; and
- others can obtain economic value from disclosing or using the information; and
- is the subject of reasonable efforts to protect its secrecy.
Because the definition of a “trade secret” requires that the information be “not generally known” and “not readily ascertainable by proper means,” customer lists and other information generally available to the public, through directories, publications, websites and otherwise, will not be protected as trade secrets.
Examples of trade secret information include:
1. Customer information
- customer lists developed internally by a company and/or its employees
- medical and dental patient lists
- a medical practice’s referral base
- financial adviser customer lists and financial information
- an insurance company’s policyholder and renewal date information
- customer buying histories, credit histories and payment terms
- customer service histories, sales volumes, product grades and preferences.
2. Financial, Pricing and Strategic Business Planning Information
- Marketing plans and targets
- Strategic growth and acquisition plans
- Business plans, methodologies and assessments
- Financial performance and financial forecasts
- Pricing strategies and profit margin information
- Bidding practices, methodologies and results
3. Manufacturing Processes and Product Information
- Product cost histories and cost savings initiatives
- Product release dates
- Packaging methods
- Supply sources
- Specialized manufacturing processes
- Partner and vendor information
- Recipes
4. Technical Information
- Product and system designs
- Computer programs
- Customized databases, software and programs
- Technical and marketing knowledge
- Research and development results (including product failure data)
- Product specifications
- Product refinement and adaptation information
If your company’s information falls within the definition of a trade secret, then you must take reasonable steps to protect its secrecy. Even if your business information may not qualify for trade secret protection, but is confidential and gives you a competitive edge, you will want to protect it and treat it as if it were a trade secret. Reasonable measures include appropriate restrictive covenant agreements, confidentiality and non-disclosure agreements, handbook provisions, limited computer and physical access to the information, and many other measures tailored to your specific business operations and needs.