What Qualifies as a Trade Secret?
Sept. 16, 2022
Question: What do Twinkies, WD-40, the New York Times Bestseller List, and Listerine have in common?
Answer: They are all trade secrets.
Probably the granddaddy of trade secrets is the recipe for Coca-Cola, which — rumor has it —is locked in a safe in the corporate headquarters in Atlanta, Georgia.
Trade secrets are protected by both federal and state law. But what are trade secrets? Two necessary elements of a trade secret are 1) that they provide or at least promise an economic benefit, and 2) that they are not easily ascertainable by others. A third element is that they are the focus of safeguarding by the owner.
If your business is being accused of misappropriating a trade secret, or you suspect someone of misappropriating a trade secret, and your business is located in the Birmingham area or across Alabama, contact Clark Law Firm PC. The firm is dedicated to defending the rights and interests of Alabama businesses involved in legal disputes. Clark Law Firm PC proudly serves clients not only in Birmingham but throughout Alabama and the Florida Panhandle.
What Is a Trade Secret?
The definition of a trade secret can take on different nuances depending on the applicable law being used for the definition. Most definitions seem to agree that a trade secret is “information” that:
Has either actual or potential economic value by not being generally known
Has value to others because they cannot ascertain the same information on their own
Is subject to reasonable efforts to maintain its secrecy
Information which may qualify as a trade secret includes, but is not limited to, recipes, formulas, algorithms, marketing techniques, proprietary databases, software programs, customer lists, and business or manufacturing processes.
History of Trade Secret Protection
Historically, trade secrets were protected by state laws until 1979 when the Uniform Law Commission created the Uniform Trade Secrets Act (UTSA), which has since been adopted by 48 states, with Alabama and North Carolina the sole holdouts.
The federal government, stepping in to fill a perceived void in the UTSA when it comes to interstate and international enforcement, first passed the Economic Espionage Act in 1996, followed by the Defend Trade Secrets Act (DTSA) of 2016. To pursue a trade secret violation under the DTSA, it must first involve an interstate or international violation, and secondly, it must be pursued in federal court.
The Alabama Trade Secrets Act
This act defines a trade secret as information “embodied in a formula, pattern, compilation, computer software, drawing, device, method, technique, or process….” This information must also have “significant economic value” and be subject to “efforts that are reasonable under the circumstances to maintain its secrecy.” And such information cannot be “readily ascertained or derived from publicly available information.”
The penalties for misappropriating someone else’s trade secret potentially include the award of an injunction to cease using the trade secret, the recovery by the owner of the trade secret of profits obtained through the misappropriation or other damages suffered by the owner, and, potentially, the award of the owner’s attorney's fees.
Reasonable Efforts to Protect a Trade Secret
The owner of a trade secret must make reasonable efforts to maintain its secrecy. This means limiting access to the information. If the trade secret is stored on a database, access must be limited only to those with a need to know and then with password protection. Likewise, if it is kept in a safe or filing cabinet, access to those repositories must be limited only to personnel with a need to know.
Employees should also be asked to sign a nondisclosure agreement (NDA). Any employee handbook should reinforce policies and procedures to protect the trade secret. As a final step, departing employees should be required to undergo an exit interview, during which the need to protect the trade secret is emphasized.
How Clark Law Firm PC Can Help
If your company has information that you treat—or want to treat—as a trade secret, contact an attorney at Clark Law Firm PC so you can begin establishing policies and procedures to exercise “reasonable” protection of your trade secret. If a trade secret is subsequently misappropriated by another person or entity, a trade secrets attorney can help initiate a trade secret lawsuit to enjoin the other party and possibly obtain damages and lost profits.
If, on the other hand, you and your business are being accused of misappropriating someone else’s trade secret, John and his team at Clark Law Firm PC are more than ready to defend you against civil litigation.
Whatever the issue you face with trade secrets, rely on Clark Law Firm PC to protect your interests and help you exercise your rights under the law. Contact the firm immediately if you are anywhere in Alabama or the Florida Panhandle.