Patenting an invention precludes retaining that same invention as a trade secret. However, contrary to a common misconception, patents and trade secrets may co-exist in a company's intellectual property strategy.
For example, before filing a patent application, the invention may be developed and perfected as a trade secret. Similarly, improvements and adaptations of the patented invention may be developed as a trade secret.
Trade secrets may encompass many types of information, including formulas, patterns, compilations, programs, devices, methods, techniques, and processes. All patentable subject matter is eligible for trade secret protection. However, not all information encompassing a trade secret may qualify as patentable subject matter. For example, trade secrets may encompass certain financial or business pieces of information that are not eligible, such as supplier and client lists.
The value of a patent lies in having a twenty-year monopoly for the claimed invention that cannot be reverse engineered. In contrast, while a trade secret may be retained indefinitely, there are no restraints on independently reverse engineering the information encompassing the trade secret. Accordingly, the strength of a trade secret is dependent on how easily the trade secret may be independently reverse engineered.
To constitute a trade secret, information must satisfy two criteria:
The information must derive economic value from not being known or readily ascertainable by other persons.
The owner of the information must keep the information secret using protective measures that are reasonable under the circumstances.
The requisite protective measures may include, for example, requiring the execution of a nondisclosure agreement, restricting access to the information to specific individuals, limiting physical access to facilities and files, securing computer networks, and educating employees on the trade secret restriction.
It is essential to document the information encompassing a trade secret in a manner that allows it to be tracked like a traditional asset. In other words, the trade secret must be articulated, memorialized, and prepared. Moreover, it must be regularly analyzed and updated with particularity over time. Of course, the information encompassing the trade secret must be contextual to the company's specific business.
Trade secrets are protected by a combination of state and federal laws.
Many states have enacted variations of the Uniform Trade Secrets Act (UTSA) providing for state based misappropriation civil suit claims. New York is an exception to this adoption, meaning that misappropriation claims in New York are governed by common law.
The Defend Trade Secret Act (DTSA) provides for federal based misappropriation civil suit claims. The DTSA does not replace state laws like the UTSA but instead creates a parallel right for a plaintiff to file trade secret misappropriation claims in federal court.