HOW TO KEEP A TRADE SECRET

 

STATE LAW

It should be appreciated that what may be considered a trade secret and the steps required to protect it are subject to state law (which means there could be 50 versions of such law). That said, most states have adopted the Uniform Trade Secrets Act as the law (or at least the legal framework) defining trade secrets and the remedies available in the event of their theft.
 

Generally speaking, the following factors are considered in determining whether a trade secret exists:

 

  1. the extent to which the information is known outside of the business; 

  2. the extent to which the information is known by employees and others involved in the business;

  3. the extent of measures taken by the business to guard the secrecy of the information; 

  4. the value of the information to the business and its competitors; 

  5. the amount of effort or money expended by the business in developing the information; and

  6. the ease or difficulty with which the information could be properly acquired or duplicated by others.

Ashland Management Inc. v. Janien, 82 N.Y.2d 395, 407, 604 N.Y.S.2d 912, 918 (1993); see also Integrated Cash Mgmt. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990) (quoting Restatement of Torts § 757, cmt. b)

 

Of the above factors, the third factor (measures taken to guard the secrecy of the information) appears to be the factor considered most frequently in the associated case law. 

 

With regard to customer information, the efforts expended and investment made by a business to develop its customer information and the lack of availability of this information to those not employed in the business weigh heavily in finding that a trade secret exists.

 

Notably, if an entity is claiming trade secret protection for information the entity stole or copied, the courts will not be impressed, positively, that is. 

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