Entry: Trade Secret
Pronunciation: trayd – see – cret
Definition: information that remains secret to others through reasonable means to protect its secrecy and creates actual or potential economic value for its owner
So, a trade secret can be broken down into four elements and 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. Let’s look at these elements one by one.
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.
Further, trade secrets are a form of intellectual property – like patents, trademarks, and copyrights. Because intellectual property is viewed by the courts as personal property (e.g. baseball glove, computer, car, clothes, jewelry, etc.) trade secrets can be freely bought, sold, leased, licensed, and otherwise transferred by the owner. However, most owners do not transfer or even tell others about their trade secrets in order to keep the trade secrets as "secret" as possible – thus maintaining and protecting the trade secrets.