An Overview of Trade Secrets

Trade secret is the oldest form of intellectual property protection, possibly dating to Ancient Rome.  While ancient, trade secret forms one of the most potent and underutilized forms of intellectual property protection.  Nearly every successful business will have multiple trade secrets; for example, many law firms have templates of various documents, such as contracts or written discovery, along with guides on the use of the templates.

Most trade secret actions are governed by State Law.  However, a version of the Uniform Trade Secrets Act has been adopted by every state except for Massachusetts, New York, and North Carolina, all of which have similar statutes in place.  To qualify as a trade secret, there must be information that is 1) used commercially; 2) is secret; and 3) that provides a competitive advantage to the person or entity with knowledge of it.  Delta Medical Systems v. Mid-American Medical Systems, 772 N.E.2d 768, 790-791 (Ill. App. Ct. 1st Dist. 2002).  All of the above requirements have been the subject of extensive litigation, and numerous non-intuitive legal analyses have developed.  For example, larger, more wealthy businesses are held to significantly higher standards in protecting trade secrets.  Jackson v. Hammer, 274 Ill. App.3d 59,  67 (Ill. App. Ct. 4th Dist. 1995).

Practically any information that provides competitive advantage is a potential trade secret.  Some examples are:

  • Methods of triaging customer service complaints
  • Business development plans
  • Market studies
  • Profit forecasts
  • Marketing plans
  • Customer research
  • Bills of material with detailed cost information
  • Customer lists
  • Business overhead analyses
  • Profit margin studies
  • Manufacturing processes
  • Schematics
  • R&D information

If your company is deriving significant profit from information, that information likely is a trade secret.  However, a company’s ability to protect the information will be highly dependent on the efforts that it takes to keep the information secret.  If sufficient steps are not taken, the trade secret will be deemed to have been abandoned.  Rockwell Graphic Systems v. DEV Industries, 925 F.2d 174, 179 (7th Cir. 1991).  However, while steps must be taken to protect the trade secret, the steps need not be perfect.  Televation Telecom. Systems v. Saindon, 169 Ill. App. 3d 8, 15-16 (Ill. App. Ct. 2nd Dist. 1988).