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What are trade secrets?

Although the term may be used in casual conversation, as a part of intellectual property, trade secrets are important and legally protected. The challenge comes in assessing what items classify as trade secrets. Understanding what a trade secret is allows you to properly protect your business interests both in everyday matters and in potential trade secret theft. 

They hold economic value

The Uniform Trade Secrets Act protects and clarifies the definition of trade secrets. The first element is that for something to be considered a trade secret, it must have actual or potential economic value. Should that secret be shared with an outside organization, there will be a negative financial impact on the owner of said trade secret. 

Only a limited group of people know them

The next important component is that a trade secret must be information limited to a particular group of people. The scope of this group depends on the situation and your organization. It could be only an executive board, a particular team or department, or merely anyone who interacts directly with production or development. 

If the information is common knowledge by the industry or general public, it is not a trade secret.

Appropriate procedures must be enacted to protect them

If information is a trade secret and pivotal to your company or product, reasonable protocol has to be in place to protect that trade secret. Examples would be making employees or staff sign non-disclosure agreements (NDAs) or similar confidentiality agreements as part of their employment. Those contracts would stipulate that although the employee may know trade secrets as part of regular job functions, there would be legal repercussions if they were to share or sell trade secrets. 

Not taking proper steps to keep trade secrets confidential compromises them and your business.

What about reverse engineering and trade secrets?

Another important consideration in trade secrets is that reverse engineering does not constitute violating a trade secret. That means that a competitor or individual might be able to take your creation or product and dismantle it or break it down to determine its components.

Since there is no direct sharing or breach of secrets in reverse engineering, it doesn’t constitute trade secret violation. The challenge to organizations comes in planning and protecting against the possibility of reverse engineering in product development. If your product can easily be taken apart or have its code broken down, it is fair game for competitors and other organizations to recreate or utilize.