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If you have confidential information critical to the success of your company, such as the formula, pattern, design, computer program, method, technique or process, you may be able to obtain a patent to protect your business from unfair competition. Designating your information as a trade secret, and taking appropriate steps to ensure the confidentiality of that information, may be a better alternative.

Trade Secrets vs. Patents

Trade SecretsSome confidential information may simply not qualify for patent protection. See our page on patent law to learn more about the requirements for patentability.

The patent process may not be the best approach, however, even if you meet the legal tests. The process of obtaining a patent can be long and costly. As a part of the process, you must put substantial information about your intellectual property on the public record. In the end, if you are granted a patent, you will have exclusive rights for only 20 years.

When you designate intellectual property as a trade secret, however, it will remain so as long as you don’t disclose or divulge the information. Furthermore, you don’t need to prepare and file any type of application with any agency to designate property as a trade secret. Instead, you simply prepare confidentiality and non-disclosure agreements that must be entered into by all parties having access to the protected property—employees, vendors, customers and others.

Remedies for the Wrongful Disclosure of a Trade Secret

Trade secret protection originated and is maintained through state laws, which use the Uniform Trade Secrets Act (the UTSA) that has helped create a more uniform body of trade secret law from state to state. Under the UTSA, a party may seek a number of remedies after violation of a trade secret agreement, including injunctive relief, monetary damages and attorney fees. The law covers the disclosure or misappropriation of trade secrets by “improper means,” defined in the statute to include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.”

The misappropriation of trade secrets (which could be the result of industrial espionage) is the only thing against which the owner of a trade secret has any recourse. The discovering of trade secrets through independent research is not considered misappropriation.

Injunctive relief (a court order refraining someone from carrying out a particular action) is available to prevent the disclosure of trade secrets by someone under an obligation not to disclose. Unfortunately, once a sensitive trade secret is leaked to the public, the effects can be extremely detrimental to a business. In many cases, no amount of money can compensate for the exposure of a trade secret.

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