This article has been prepared in response to requests for information concerning trade secrets, including the basic steps in creating and protecting trade secret rights in the United States. This memo only provides a brief overview. It is not intended to cover all possible situations and every exception. It is not intended as a substitute for legal advice. Consultation with an attorney experienced in trademark law is recommended.
After reading this, if you wish to consider this firm representing you or have any questions on trade secrets, please call so that we can discuss whether there are any conflicts that would prohibit an attorney-client relationship, and whether we can reach a mutually agreeable arrangement.
What is a Trade Secret?
A trade secret is any information that is not generally known to the trade. It may be a formula, process, customer list or any other confidential information. Under the New Mexico Uniform Trade Secrets statute, a trade secret is defined as Ainformation, including a formula ... that:
1) Aderives independent economic value, actual or potential, from not being generally known ...; and
2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.@
Classic examples of trade secrets include the formulas for Coca-Cola and Smith=s Black Cough Drops, both of which are supposedly over 100 years old.
Steps in Obtaining a Trade Secret
There are a number of factors that need to be considered in determining whether a formula, process, customer list, supplier list, or other business information will be protected as a trade secret, including:
1) The expenditure of money, time and/or labor in developing the trade secret;
2) The novelty of the secret;
3) The continuing effort by the owner of the secret to maintain secrecy, including the prevention of unauthorized disclosure by employees; and
4) The relationship between the parties having knowledge of the secret.
The continuous effort by the owner to maintain secrecy, including prevention of unauthorized disclosure by employees, is a very important part of the employer/employee relationship. The protection of trade secrets involves placing restriction on employees. While it is preferable to have a written agreement, there should be at least a verbal understanding on the part of the employee not to divulge any trade secrets owned or used by the employer. New Mexico law does not require a written agreement.
Other factors to be considered include:
1) The importance of identifying the trade secret as a trade secret;
2) The importance of determining which employees should know the trade secret; and
3) What steps to take when an employee leaves or is terminated.
It is important not to confuse non-compete agreements (or, Acovenants not to compete@ clauses) with express or implied agreements not to divulge or use trade secrets. Also, keep in mind that courts are reluctant to prohibit a former employee from using knowledge or expertise acquired through past experience which would increase the employee=s skills.
The duration of a trade secret is indefinite; it lasts as long as the secret is maintained. It may disappear with the death of the owner, such as the case involving the method of treating wood employed by the famous violin maker Stradivari. Alternately, it will lose its value when it becomes a matter of general public knowledge. However, the fact that a limited number of others may have the same of substantially the same secret, so long as they maintain their secret, does not mean that the secret is publicly known.
Under the New Mexico Uniform Trade Secrets Act, a court may issue an order to prevent actual or threatened misappropriation of a trade secret. Damages are also potentially available and can include both actual loss caused by revealing the secret and any unjust gain caused by this action. In case of willful and malicious misappropriation, actual damages may be doubled and attorneys= fees may be awarded to the successful trade secret owner.
Notice of Trade Secret Status
There is no formal method of providing notice regarding a trade secret. At a minimum, information containing a trade secret should be labeled as Aproprietary information@ or Aconfidential - internal use only@ or similar language. This notice should apprise all viewers of the information of its proprietary nature, and that the information is being claimed as a trade secret by your organization.
While this letter is quite general in describing trade secrets, it serves to inform you of the general principals surrounding trade secrets. Southwest Intellectual Property Services is committed to serving both small businesses and the corporate community in attaining their business objectives regarding intellectual property law. We look forward to assisting you with the protection of your intellectual property assets.
While this article is quite general in describing the trade secret process, it serves to inform you of the general principals surrounding trademark law. We look forward to assisting you with the protection of your intellectual property assets, if possible.