Sophos Law Guides

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What is a Trade Secret?

A trade secret is a type of intellectual property protected under both state and federal law. The applicable state law is generally a derivation of the Uniform Trade Secrets Act and the applicable federal law is found in Title 18 Chapter 90 of the U.S. Code. For a company to develop a protectable trade secret under both state and federal law, the company must meet the following two prong test:

  1. The information in question must derive independent economic value from not being generally known to other people who could gain economic value from the disclosure.
  2. The information must be subject to efforts that are reasonable under the circumstances to maintain secrecy.

So long as a company meets the two prong test for creation of a trade secret, that company can obtain an injunction against actual or threatened misappropriation. Further, unlike patents and copyrights, so long as the company continues to meet the two prong test, trade secret rights can exist in perpetuity. Misappropriation is the acquisition of a trade secret through improper means or disclosure of a trade secret without the consent of the trade secret’s owner. Misappropriation does not include independent invention, discovery by reverse engineering, discovery under license, observation of an item on public display, or discovery via published literature.

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