Trade Secrets and NDAs
Trade secrets protect valuable confidential business information. Unlike patents, trade secrets require no registration and can last indefinitely — as long as the information remains secret.
What Qualifies as a Trade Secret?
Under the Uniform Trade Secrets Act (UTSA) and the federal Defend Trade Secrets Act (DTSA) of 2016, a trade secret is information that:
Derives independent economic value from not being generally knownIs subject to reasonable efforts to maintain its secrecyExamples include:
Formulas (Coca-Cola's recipe, WD-40's formula)Manufacturing processesCustomer lists and pricing strategiesAlgorithms and software architecturesBusiness plans and financial projectionsResearch data and test resultsProtecting Trade Secrets
Businesses must take reasonable measures to maintain secrecy:
Implement access controls (passwords, locked areas, need-to-know restrictions)Use non-disclosure agreements (NDAs) with employees, contractors, and business partnersMark documents as confidentialConduct exit interviews and remind departing employees of their obligationsImplement cybersecurity protectionsNon-Disclosure Agreements (NDAs)
An NDA (also called a confidentiality agreement) is a contract that creates a legal obligation to keep information confidential. Key provisions include:
Definition of confidential informationObligations of the receiving partyExclusions — information that is already public, independently developed, or received from other sourcesDuration — how long the obligations lastRemedies for breachNDAs can be:
Unilateral — one party discloses, the other agrees to confidentialityMutual — both parties share and protect each other's informationMisappropriation and Remedies
Trade secret misappropriation occurs when someone acquires, discloses, or uses a trade secret through improper means (theft, breach of contract, espionage). Remedies include:
Injunctive relief — a court order preventing further use or disclosureDamages — actual losses and unjust enrichment; in cases of willful misappropriation, courts may award exemplary (punitive) damages up to double the actual damagesAttorney's fees — in cases of bad faith or willful misappropriationTrade Secrets vs. Patents
FeatureTrade SecretPatent
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DurationIndefinite (if kept secret)20 years
RegistrationNone requiredUSPTO application
DisclosureMust remain secretPublished publicly
Protection against reverse engineeringNoYes
CostLow (security measures)High (application fees, attorney costs)