Trade Secrets

Consider trade secrets, especially when your commercially important secrets are unsuitable for patent or copyright protection.

Consider the formula for Coca-Cola and its “natural flavorings”, which dates back over 100 years.  Even if Coke could have patented the formula unlikely), the patent have expired long ago.  The formula might not be even eligible for copyright since it is a list.  Even if Coke had filed a copyright, the copyright would have also expired by now. The copyright would also have been useless. This is because copyrights for a recipe only cover its sequence of printed words.  However as various closely guarded trade secrets, the formula remains valuable (the trademark, of course, is almost priceless).

Trade secrets are for more than just recipes

In addition to recipes, trade secrets can include production methods, marketing methods, computer software, and the like. If your information gives a business competitive advantage, and is not generally known, it can be a potential trade secret.

Trade secret protection is very narrow – unless you can prove to a court that you carefully guarded the secret, such as with NDA, and someone with access to the secret then misappropriated the secret, you are out of luck. If someone figures out the secret by other means (e.g. reverse engineering), there is no protection, even for Coca-Cola.

However, if you can convince the court that trade secret theft occurred, you can request injunctions (e.g. block disclosure), damages (your economic harm caused by the theft), and possibly even seizure of materials and/or attorney fees.

Until recently, only states could prosecute trade secret theft.  However, in May 2016, the US government signed the Defend Trade Secrets Act of 2016 (DTSA) into law.  As a result, both state and federal courts can handle trade secret theft. This type of theft can now be charged under both civil and even criminal law.

Don’t forget the other types of IP

So if you are doing a startup, think about which of your non-commonly known information gives you a competitive edge. Where appropriate, apply for patents and trademarks and register copyrights to prove copyright ownership.  You should remember, however, that the USPTO usually publishes patent applications 18 months after filing. So if you think that your patent application may have some potential trade secrets, consider filing it with a non-publication request.

For the rest, although you may need to make some disclosures for marketing and fund-raising, try to limit this. You should also take positive steps (e.g. restriction of access, nondisclosure agreements) to preserve not-generally-known information that is competitively important.

Illustration: “Sshh” by Deborah Azzopradi