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Published: 2008-03-26

What is Intellectual Property?: Trade Secret Law



Intellectual Property is the group of legal rights in things that people create or invent. Intellectual property rights include patent, copyright, trademark and trade secret rights. In Europe and some other countries, "moral rights", which are rights of the artist not to have her work greatly altered, are also included.

Origins of Intellectual Property Law

Most people are surprised to discover that intellectual property rights originated with our Founding Fathers in Article 1, Section 8, Clause 8 of the U.S. Constitution which states that Congress shall have the power "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The right to exclusive ownership and use of one's inventions and the monetary rewards from giving others permission to use them, work in conjunction with the other beliefs of our Founders.

In the middle to late nineteenth century, fostering of creation with monetary reward grew into capitalism. Capitalism embodied (a) the benefits and rewards of hard work (concepts from Puritanism);(b) the exchange of business ideas through products and services; and (c) competition in the marketplace and financial reward for the most popular or beneficial ideas (i.e. those items that sell the most make the most for their inventors).

It was not accidental that capitalism had many of the same theoretical bases as Charles Darwin's notions of survival of the fittest that was authored during roughly the same time period. Author and Harvard biology professor Stephen Jay Gould states that Darwin read economist Adam Smith's writings prior to authoring his "survival of the fittest"theory[1].

Indeed, intellectual property law, with exception of patents that preceded the rest in codification by several centuries, was mostly codified during this same period-- the late eighteenth to late nineteenth centuries. The laws sought to protection rights in creations and ensure earned monetary reward for their creators. These rewards incentivized others to create.

The heart of United States intellectual property law is the balancing of two goals: financially rewarding creation through granting of exclusive rights to the creators, and promoting the free flow of ideas to facilitate more inventions. The tension in these goals reflects the careful balance between the "Promotion of Science and Useful Arts" constitutional clause above and the First Amendment - between ownership of art and words and the freedom to speak and express them.

Understanding the tension between these goals is the key to understanding intellectual property law. The balance of these concepts is visible throughout intellectual property cases and statutes. Keep these goals in mind whenever you try to assess an intellectual property problem and the solution will be much easier to grasp.

With this in mind, let's consider what rights you have under trade secret law.

Trade Secret Law Origins

The first assertions of trade secret rights are reported to be in England in the sixteenth century. In the United States, the first United States case was in Massachusetts in 1868.

When Do You Have a Trade Secret?

Most states have adopted some form of the Uniform Trade Secret Act (UTSA). The UTSA sought to provide some consistency in trade secret law that, until recently, was protected only by state laws. The Act defines a trade secret as:

"..information, including a formula, pattern,compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

When you have information that has economic value as a result of its secrecy and you use reasonable efforts to keep it secret, you have a trade secret. There is no registration of trade secrets.

There is now also federal protection of trade secrets under 18 USC 1832 that defines and protects trade secret use, copying and theft in similar fashion to the UTSA.

A good example of a trade secret is the recipe for Coca Cola.

What's Required to Have a Trade Secret?

In order to keep the trade secret status of information, you must keep it secret.

For example, if you wanted to maintain trade secret protection of the code for your website, you would have to program the pages so that the "view source" option would not allow Internet users to freely view the code.

Other steps to take would be using confidentiality agreements to maintain its secrecy in business deals and discussion, allowing only employees who must know the information to have access to it, and keeping the information in a secured environment.

What Do You Have When You Have a Trade Secret and Is There Any Risk?

Having a trade secret means that you have a legal cause of action for damages, or an injunction to stop the use, if another party steals, copies or uses your trade secret without your permission.

The risk to maintaining trade secret protection is that you do not take advantage of other forms of intellectual property protection such as patent and copyright that require registration and disclosure. Patent, upon granting of your application, requires full disclosure of the information patented. Copyright registration recognizes some trade secret protection and permit abbreviated registrations for some items, such as computer programs. In addition to missing these other intellectual property protections, the registration process provides proof of your ownership of the material as of the registration date.

In most intellectual property cases, the other party claims that he or she, in fact, created or used the item or information first and that your use is unauthorized. Therefore, it will be necessary to prove that you originally created and owned the trade secret.

It is vital to maintain dated proof of creation of your trade secret. You can do this cheaply by mailing the information to yourself and retaining the postmarked, sealed envelope. Alternatively, you can deposit a copy of the information with a source code escrow company that would maintain a dated copy of the information in storage.


[1] Stephen Jay Gould, The Panda's Thumb: More Reflections in Natural History (NewYork: Norton, 1982), p.64 as reported on www.crosscurrents.org/darwin.