Trade Secrets

The Way of the Ninja – Protecting Secrets in Business

No one method of protecting ideas will suit all purposes.  Often, when considering how to protect and idea, patents leap to mind.  However, there is a longer standing, often cheaper, and potentially stronger form of IP protection.  Secrets.

“Silence is a true friend who never betrays.”  Confucius.

Clearly, nothing under the law is as straightforward as what you learned on the playground.  No pinky swears allowed in the world of trade secrets.  However, given some pre-planning and rigor, you can add this powerful weapon to your IP arsenal.

What is it?

“A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.”  (Restatement of Torts.)

What is required?

There is no agency authorized to “grant” trade secrets in the same way that patents and trademarks are granted.  However, the Texas Supreme Court has  outlines factors to be considered (not all are required):

  • the extent to which the information is known outside the secret-holder’s business
  • the extent to which it is known by employee and others involved in the secret-holder’s business
  • the extent of measures taken by him to guard the secrecy of the information
  • the value of the information to him and to his competitors
  • the amount of effort or money expended by him in developing the information
  • the ease or difficulty with which the information could be properly acquired or duplicated by others

How is it protected?

Trade secrets are protected by keeping them a secret.  This means there can be NO disclosures without a secrecy agreement in place prior to the disclosure.  There must be sufficient mechanisms within the organization to safeguard the secret.  (Think lockboxes, computer encryption, and checkout/check-in procedures.)

Drawbacks for this Protection

Innocent recipients and independent developers are NOT bound by the trade secret.  Furthermore, this form of protection requires constant vigilance.

Un-ringing the Bell

In the end, you should be very cautious while using this form of protection.  Some subject matter are not amenable to this sort of protection. Even if the trade secret is kept appropriately and you are able to prevail on the misappropriation lawsuit and win an injunction, you can’t un-disclose information.  Once released, some subject matter is disseminated too quickly and the damage is done.  Unless you can trace the information back to the original bad-actor, you may not be able to prevent others from using it.  Sometimes you simply cannot un-ring the bell.

(Texan Ninja Business Man image courtesy of and (c) Rachel J. Allenbaugh 2012.)

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