Written by: Caldwell

Why should you rely on trade secrets when other forms of intellectual property protections are available? And exactly how much effort and money should a business expend for safeguarding those secrets? The other intellectual property branches of copyrights and patents afford authors and inventors exclusive rights to their creations. However, not all creations are best fit for publication as is required for both patent and copyright protection. In many cases, patents are published for public view before issuance. Additionally, they have a statutorily defined term after which they enter the public domain. A copyright also has a statutorily limited term, although it is guaranteed to endure longer than the author since the statutory term of a copyright is usually for the life of the author plus an additional 70 years, and sometimes even longer than that. But even copyrighted material is subject to “fair use” exceptions including criticism, commentary, reporting, teaching, or research. So, if a business wants to protect its secrets from use by competitors or the public at large for indefinite time periods, it may be best to keep the details in-house. 

Indeed, secrets are volatile. How, then, do some business secrets survive? How has Coca-Cola, for instance, kept its recipe in the dark for more than 120 years, even when defector employees attempt to sell the recipe to its arch-enemy rival? How have KFC’s fried chicken ingredients, Microsoft’s source code, and WD-40’s lubricant formula stayed out of the public light for so long? 

The answer has very little to do with the trustworthiness of their employees, although that certainly plays a part. The Uniform Trade Secrets Act (UTSA) prohibits misappropriating or improperly sharing formulas, patterns, compilations, programs, devices, methods, techniques, processes, drawings, cost data, and customer lists.1 New York is the only state in the country that has not yet adopted the UTSA or some semblance of it, although pending legislation targets bringing the state within conformity. The Federal version, titled the Defend Trade Secrets Act of 2016, protects trade secrets within the confines of interstate commerce.2  

These combined laws work to protect trade secrets, even in cases of anonymous release, by holding receivers of misappropriated trade secrets liable. When a business builds its castle around a trade secret, it may rely on non-disclosure agreements for its employees, extensive cyber security for its networks, physical checkpoints restricting access, and a multitude of other methods of protection. But the castle walls are designed around cost-effectiveness, just like every other business aspect, which means they will almost always have at least some penetrable holes. So what happens when an attacker tries to exploit these holes or an aerial spy strikes from above?  

The 5th Circuit patched the holes and built the roof for our hypothetical castle. The courts will extend the reasonable measures taken by a business to protect trade secrets, and afford additional protection against unforeseeable, malicious actors. In the 5th Circuit matter E. I. du Pont deNemours & Co. v. Christopher, for instance, the Defendant’s hired photographers for competitor reconnaissance purposes, i.e., aerial photography of a new methanol production plant. While legal in every other aspect, such acts were deemed wrongful misappropriation of trade secrets and the court held both the photographers and the hiring competitor liable for damages.3 The court went on to establish that a trade secret owner need not “guard against the unanticipated, the undetectable, or the unpreventable methods of espionage now available.”4  

Knowing the extent of appropriate measures your business needs to ensure the courts will seal up any remaining cracks requires a delicate balance. But the courts have shed a flickering amount of light on the area to guide us. Carelessly emailing secret design models will fall short of qualifying for trade secret protection.5 But financial investment-backed, reasonable expectations of secrecy, especially based on promises from a federal agency will be extended protection, up to where the information was voluntarily disclosed for financial gain.6 Trade secret protection is expected to mirror the value of the secret, aligned to industry standards, be more than shallow words, and be based on information that has value by being unknown to others.  

So if you or your business experiences a data spill where a trade secret is improperly unveiled, there is still room to recover. In some instances, action must be taken swiftly. In Nevada, for instance, misappropriated trade secrets, even if posted online, are still protected so long as the owner quickly obtains an injunction or temporary restraining order.7 

In the end, the walls a company builds to protect its secrets, so long as they are reasonably high and sturdy, will be afforded an added moat and aerial defense by the courts. Decisions around how to perfectly protect intellectual property are nuanced balancing acts. But the law and the courts will reward diligent, reasonable measures. So while the perfect security plan is situation-dependent, your trade secret castle may be more fortified than you think. 

This publication is distributed with the understanding that the author, publisher, and distributor of this publication and any linked publication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, portions of this publication may constitute Attorney Advertising.

[1] Uniform Trade Secrets Act with 1985 Amendments, National Conference of Commissioners on Uniform State Laws

[2] 18 U.S.C. § 1836 (2016)

[3] E. I. du Pont deNemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970)

[4] Id. at 1016

[5] Mason v. AmTrust Fin. Servs., 848 F. App’x 447 (2d Cir. 2021)

[6] Ruckelshaus v. Monsanto Co., 467 U.S. 986, 104 S. Ct. 2862 (1984)

[7] Nev. Rev. Stat. Ann. § 600A.055