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Trade secrets are an important and valuable type of intellectual property protection. They are similar to patents, trademarks, or copyrights, however, they are not known to the public – they are secrets. A trade secret can be any business information that adds value to a business by remaining a secret. These kinds of secrets can take a number of forms such as a formula, process, pattern, technique, device, ingredient, or compilation. Keeping this information confidential usually allows the owner to have a conspicuous advantage over their competitors.
Protection of Trade Secrets
For a trade secret to exist, there are three requirements that must be met. As explained by the United States Patent and Trademark Office (USPTO), and as echoed in the law (Defend Trade Secrets Act of 2016), the three elements that need to be shown for a trade secret to exist are the following.
A trade secret: 1. is information that has either actual or potential independent economic value by virtue of not being generally known, 2. has value to others who cannot legitimately obtain the information, and 3. is subject to reasonable efforts to maintain its secrecy. All three elements are required; if any element ceases to exist, then the trade secret will also cease to exist. Otherwise there is no limit on the amount of time a trade secret is protected.
USPTO IP policy
As long as all three required elements are met, a trade secret can be held for as long as a company or inventor wishes. This kind of intellectual property is only considered valuable when maintained as confidential information.
Trade Secret Protection – The Laws
The Economic Espionage Act of 1996 criminalizes the theft of trade secrets under two circumstances. The first criminalized act is the misappropriation or conspiracy of misappropriation of a trade secret with the knowledge or intent that the theft will benefit a foreign entity. The consequences of violating this first section of the act includes fines up to $50,000 per offense and/or imprisonment with a maximum of 15 years if an individual. Consequences for a company or organization include fines up to $10 million.
The second criminalized act is the theft of a trade secret. This second section addresses theft related to a product or service that is used in or intended to be used in interstate or international commerce, and intending or knowing that the offense will injure any owner of that trade secret. The consequences of violating this would be imprisonment for a maximum of 10 years for individual violators and fines up to $5 million for companies or organizations.
Defend Trade Secrets Act of 2016
In 2016, the Defend Trade Secrets Act (DTSA) was created to amend the Economic Espionage Act of 1996. This act establishes a federal, private, and civil cause of action for the theft or misappropriation of a trade secret. This protects secret owners by providing a reliable and predictable manner to protect their intellectual property from being used inappropriately. Trade secret owners have the option to file suit in state or federal court since the DTSA does not preempt existing state trade secret laws.
Trade Secrets vs. Patents, Trademarks, and Copyrights
A trade secret, although a form of intellectual property protection, is slightly different from the other forms. A trade secret cannot be filed to any government entity such as the USPTO. Because there is no government entity protection or acknowledgement of the trade secret, it is the responsibility of the trade secret owner to keep what they are protecting out of the public domain. This means if the secret gets leaked, whoever utilizes the leak cannot be sued.
For comparison: utility patents offer a legal monopoly for 20 years, trademarks can be renewed indefinitely, and copyrights are for the life of the owner plus 75 years.
Examples of Trade Secrets – Famous, Infamous, & Not Well Known
There are many popular trade secret examples that may not be recognized as a trade secret by the public.
One example is the famous KFC original recipe of 13 spices. The secret ingredients for the herbs and spices recipe was kept in Colonel Sanders’ mind until he wrote it down and placed it into a safe in Kentucky. Only a select few know the trade secret and are bound by a confidentiality agreement. Read more about non-disclosure agreements.
Another famous example of a trade secret is the Coca Cola formula. Coca Cola is a billion dollar company centered on the uniqueness of its recipe. The owners of Coca Cola opted for trade secret protection over patent protection for their soda recipe in order to keep their advantage over their competitors for longer than a patent lasts.
Coca Cola has been involved in more than one trade secret lawsuit where multiple people were accused of stealing trade secrets. In 2015, three people were federally arrested and charged with unlawfully stealing and selling Coca Cola trade secrets as well as wire fraud. They even went as far as to offer the trade secret to Coca Cola’s rival company, PepsiCo. In 2021, a PhD chemist who formally worked for Coca Cola was convicted of trade secret theft from Coca Cola. Specifically convicted of conspiring to commit economic espionage and to steal trade secrets, possession of stolen trade secrets, economic espionage, and wire fraud.
Today’s most infamous trade secret is the Google search results listing algorithm/system. The Google search results listing algorithm is one of the most infamous examples of a trade secret and one of the most valuable. The search results given to internet searchers using Google is the source of Google’s success and profitability. The algorithm is extremely well-guarded in an effort to protect Google’s profitability. This trade secret appears to be worth billions – yes, the one with a “b.”
There are trade secret examples one may not realize are secrets such as Twinkies and Krispy Kreme doughnuts. These are kept secret to create unique products, and thus, a competitive advantage. Another lesser known trade secret is what is required for a book to be on the New York Times bestseller list.
