In this article, we’ll discuss 10 of the most common questions associated with trade secrets. A trade secret is a type of intellectual property – like patent, trademark, or copyright. However, trade secrets tend to be one of the most misidentified and misunderstood types of intellectual property. Why? Because of their very nature – i.e. they are "secret."

In this article, we’ll expose you to some of the most common questions associated with trade secrets and give you a taste of what makes them "secret" – and often very valuable!

Next, we’ll go over trade secret questions 1 through 3.

A trade secret can be defined as (i) information (ii) that remains secret to others (iii) through reasonable means to protect its secrecy and (iv) creates actual or potential economic value for its owner.

In other words, first, a trade secret can be nearly any type of information such as processes, tools, programs, techniques, formulas, plans, patterns, compounds, compilations, devices, etc. that are kept secret by the owner and not easily obtainable or readily known by others. One of the most popular trade secrets in the world is Coca-Cola’s recipe for its Coca-Cola carbonated beverage drink. Nearly everyone has drank Coca-Cola but almost no one knows its secret recipe – its most valuable trade secret.

Second, the trade secret nearly always has to remain secret to remain a trade secret. If the trade secret is known by others, it most likely is not a trade secret.

Third, the owner needs to take some measures to protect the trade secret. For example, the owner of a paint company could lock all the recipes for its paint in a vault and only allow the owners and chemists to know the secret recipes.

Fourth, a trade secret usually needs to create some type of actual or potential economic value for its owner. This generally means that the information needs to have some type of monetary value.

To answer this question you need to know the definitions of a trade secret, copyright, trademark, and patent. See the answer to Question 1 for the definition of a trade secret.

A copyright is a legal concept that protects works of authorship (e.g. such as short stories, books, music, plays, choreographies, architectures, movies, etc.) that are fixed in some kind of tangible medium of expression (e.g. on paper, on a recording device, in any kind of fixed material). But a copyright does not protect the actual ideas, procedures, processes, systems, or discoveries in the copyright. For example, if you write a song about love, you cannot copyright the idea of love. Rather, you can only copyright your expression of love in the song.

A trademark is a legal concept that protects words, names, symbols, logos, and devices used in connection with goods or services to indicate the source of those goods and services. In short, a trademark is a source identifier. This means a trademark is a "mark" used for consumers so they can easily identify and differentiate between different products and services in the marketplace.

A patent is a legal concept that grants protections to individuals who create a new invention. Technically speaking, a patent grants the holder of the patent the right to exclude others from making, using, or selling the invention.

No. Unlike patents, trademarks, and copyrights, trade secrets cannot be filed or registered with any government body or agency for protection. A trade secret remains a “secret” based on the fact that others do not know about it. And a trade secret remains protected as long as it remains unknown to others.

Next, we’ll go over trade secret questions 4 – 6.

You create a trade secret the moment you meet its definition. In other words, you create a trade secret the moment you take (i) information (ii) that remains secret to others (iii) and you take reasonable means to protect its secrecy and (iv) the trade secret has some type of actual or potential economic value (e.g. it has monetary value). That’s it. You don’t have to technically do anything else.

In short, anything that does not meet its definition. For example, just having information that you keep secret from others does not necessarily mean you’ve created a trade secret. The trade secret would have to hold some type of value – which generally means economic or monetary value – for your business and/or endeavor. Further, inherent to the definition of a trade secret, the information would have to remain secret even when you’re selling or using your product or service. In other words, information would not be considered a trade secret if you had to reveal it to the public.

Sure. As mentioned previously, Coca-Cola’s recipe for its Coca-Cola carbonated beverage is one of the most famous trade secrets in the world. It’s a trade secret because only a select few within the Coca-Cola Corporation know the exact recipe for the soft drink. While nearly everyone has tried Cola-Cola, and many have attempted to reproduce it, no one knows for sure the exact ingredients of the beverage.

Google’s algorithm for its search engine is also a very valuable trade secret. Everyone knows that Google uses an algorithm that ranks websites based on many factors including inbound links, page rank, relevant text, anchor tags, etc. However, no one except perhaps Larry Page and Sergey Brin, the founders of Google, know the exact algorithm for the Google search engine – which has made Page and Brin billionaires.

Other real-life examples of trade secrets could include such things as the processes that Intel uses to make its integrated circuits for computers. Intel likely has patents on many of these processes, but certain aspects of the processes may very likely not be patented and are simply left "secret" to others. These secret processes would be trade secrets – and very valuable.

Of course, there are many other types of trade secrets. However, the problem is that we have no way to learn about many of them because of their inherent nature – they are secrets.

Next, we’ll go over trade secret questions 7 – 9.

Trade secrets can last in perpetuity (i.e. forever) – if they are property maintained and protected. Remember, you do not register a trade secret with the government. Trade secrets are protected by the very fact of keeping them secret! A good way to think of how long a trade secret lasts is as such: "Once the trade secret is out, it’s likely finished."

Yes. You can freely transfer your trade secret to others in any way you choose. This is because a trade secret is viewed as a piece of personal property in the eyes of the law – just like patents, trademarks, and copyrights. In other words, a trade secret owner owns the rights to sell, license, lease, or otherwise transfer the trade secret to others for pecuniary gain (e.g. to make money). Personal property like a book, computer, car, TV, clothes, etc. are bought and sold all the time. In the same way, trade secrets (and any other form of intellectual property) can be bought and sold. However, companies generally do not transfer trade secrets too often. Why? Because in order to maintain and protect the trade secret it must remain "secret." And the more people that know about the trade secret the more likely it will slip out to others who are not supposed to know.

This depends on how one tries to obtain the trade secret. In other words, there are legal and illegal means in trying to obtain a trade secret.

Anyone can try to legally reproduce a trade secret – this is generally referred to as reverse engineering. Reverse engineering occurs when one take the trade secret (e.g. recipe) and breaks it down to determine all its components. For example, Pepsi Corporation could legally buy Coca-Cola and give the carbonated beverage to a team of chemists that it hires to try and reverse engineer the beverage to determine the exact components of the recipe. However, this would likely be a very difficult and costly thing to do. Plus, what benefit would it really bring to Pepsi and it would likely offend many consumers.

There are also illegal ways to try and obtain a trade secret – referred to as misappropriation of a trade secret. Misappropriation occurs when another acquires a trade secret by improper means or discloses or uses the trade secret without the consent of the owner of the trade secret. Let’s go over an example to illustrate.

Assume Bob breaks into the Coca-Cola Corporation, searches for, finds, and steals Coca-Cola’s recipe for its Coca-Cola carbonated beverage. Here, Bob has misappropriated the trade secret (as well as committed many other crimes including burglary, theft, etc.). Then, assume Bob sells the trade secret to a few owners at Pepsi who pay Bob a hefty sum for the recipe. These Pepsi owners now have also misappropriated the trade secret because they knowingly acquired it by improper means.

What could happen to someone who misappropriates a trade secret?

Next, we’ll go over that in trade secret question 10.

A trade secret owner can enforce his/her rights in two main ways: (i) injunctive relief and (ii) damages (e.g. monetary reimbursement). An injunction is a court order that stops or compels another to do or not do something. For example, if Coca-Cola found out that Bob stole its Coca-Cola recipe it could immediately file an injunction with the court to stop Bob from giving the information away to others. Coca-Cola would also likely sue Bob for a large amount of damages – i.e. monetary relief – that Coca-Cola lost due to Bob’s actions. In other words, Coca-Cola could argue that it lost business because of all of the consumers who now drink Pepsi instead of Coca-Cola due to Bob’s misappropriation of its recipe. Coca-Cola might also be able to recover through other causes of action including unjust enrichment and perhaps get attorney’s fees.

Finally, we’ll wrap up this article with some main considerations.

In this article, we covered some of the most common trade secret questions. We talked about the definition of a trade secret, the differences between trade secrets and other forms of intellectual property, how trade secrets are created, transferred, and how long they last, went over some real-life examples of trade secrets, and talked about reverse engineering, misappropriation, and remedies.

Now, you should have a much better appreciation of trade secrets and what makes them so "secret" and valuable. We also encourage you to read related articles on intellectual property to gain a better understanding of this area of the law.