Friday, 15 March 2019

Trademark Law

Trademark Law

Trademark Law

The most important point to understand about trade secrets is that there is no crisp, clear definition of what they are. Rather, the context in which a dispute over ownership of information arises will determine whether a court will treat the information as a trade secret. As a general rule, information that has commercial value and that has been scrupulously kept confidential will be considered a trade secret; the owner of the information will be entitled to court relief against those who have stolen or divulged it in violation of a duty of trust or a written nondisclosure agreement.

What kind of information qualifies as a trade secret?

A trade secret may consist of any formula, pattern, physical device, idea, process, compilation of information or other information that both:
  • provides the owner of the information with a competitive advantage in the marketplace, and
  • is treated in a way that can reasonably be expected to prevent the public or competitors from learning about it, absent improper acquisition or theft.
Trade secrets often comprise customer lists and other sensitive marketing information. Other specific items that may be trade secrets include:
  • biological inventions (unpatented)
  • chemical inventions (unpatented)
  • computer hardware
  • computer software
  • cosmetics
  • electrical inventions (unpatented)
  • electronic inventions (unpatented)
  • fabric
  • food inventions
  • formulas—chemical
  • formulas—cosmetic
  • formulas—food
  • machines
  • machines—internal parts
  • magic tricks or techniques
  • manufacturing processes
  • mechanical inventions
  • medical devices—mechanical
  • movie plots (not written)
  • movies—script
  • movies—treatment
  • musical composition
  • odors/processes
  • photographic processes, and
  • project designs.
The one element that these items of information have in common is that they have the potential to make money for their owners if they are kept secret from would-be competitors and are used to make money in the marketplace. 

What makes something a trade secret?

As mentioned, a trade secret is any information that both benefits a business commercially and is kept a secret. More specifically, when deciding whether something qualifies as a trade secret, courts will typically consider the following factors:
  • the extent to which the information is known outside of the particular business entity
  • the extent to which the information is known by employees and others involved in the business
  • the extent to which measures have been taken to guard the secrecy of the information
  • the value of the information to the business, and
  • the difficulty with which the information could be properly acquired or independently duplicated by others.

How are trade secrets lost or stolen?

Information that qualifies as a trade secret is subject to legal protection (against theft and misappropriation) as a form of valuable property—but only if the owner has taken the necessary steps to preserve its secrecy. If the owner has not diligently tried to keep the information secret, courts will usually refuse to extend any help to the trade secret owner if others learn of the information.
Some activities that the courts will commonly treat as trade secret theft—which means the owner will be afforded some judicial relief, such as damages or an order preventing use of the stolen information—are:
  • disclosures by key employees (current and former managers, scientists and others occupying positions of trust) in violation of their duty of trust toward their employer
  • disclosures by employees (current and former) in violation of a nondisclosure agreement entered into with their employer
  • disclosures by suppliers, consultants, financial advisors or others who signed nondisclosure agreements with the trade secret owner, promising not to disclose the information
  • industrial espionage, and
  • disclosures by any person owing an implied duty to the employer not to make such disclosure, such as directors, corporate offices and other high-level salaried employees.
When a disclosure is considered wrongful, the courts may also consider use of the information wrongful and issue an order (injunction) preventing its use for a particular period of time.

May trade secrets be sold?

As with other types of property—such as goods, accounts receivable, patents and trademarks—trade secrets may be sold by one business to another. Most trade secret sales occur as part of the sale of the business owning the trade secret, but that is not mandatory.

How is trade secret protection enforced?

If the court finds that trade secret theft has occurred, it may issue an order (injunction) requiring all those wrongfully in possession of the information to refrain from using it or disclosing it to others. The court may also award the trade secret owner money damages to compensate for any monetary loss suffered as a result of the theft. In cases involving willful or deliberate theft, the court may also award punitive damages to punish the wrongdoer. Finally, in clear-cut cases, federal and state criminal antitheft laws may be invoked and the trade secret thief subjected to criminal prosecution.

Trade secret resources

If you’re interested in preparing your own trade secret protection contracts, consult Nondisclosure Agreements: Protect Your Trade Secrets and More, by Richard Stim and Stephen Fishman (Nolo).
You can also find valuable information about trade secrets by using the Trade Secret Home Page ( This site provides discussions of recent developments and general background information on trade secrets. 

No comments:

Post a comment