Articles on Law, Science, and Engineering

PART I: About Intellectual Property (Cont'd)

WHAT IS A TRADE SECRET?

A trade secret is business information which has been kept secret by its user. To be considered a trade secret, the information must provide its user with a competitive advantage, be valuable, have required some investment, and be secret. In fact, the owner of a trade secret must take affirmative steps to protect it from discovery by competitors and others who seek to use it for their own benefit.

Trade secrets, like patents, are a form of intellectual property. However, unlike patents and copyrights, trade secrets are protected in each state by local laws. And while a trade secret has an owner, the owner does not possess the same type of property right as, for example, a patent holder owns. Rather, s/he has the right to prevent others from taking the secret in an unfair or otherwise improper manner. Thus, liability for stealing a trade secret arises not from the taking or using of the secret, but from the improper method of the taking. For example, liability does not arise from independent development, nor from fair methods of taking, such as reverse engineering, examination of publications, and the like.

Unlike patents, trade secrets are secret. Even though keeping data secret may conflict with the professional responsibility of scientists to share scientific information, scientists may be liable to the owner of trade secrets if they disclose them. For example, a duty of nondisclosure by an employee exists because an employer-employee relationship is considered confidential by the law. Thus, an employee who discloses a trade secret learned during his employ has taken the secret by unfair means because s/he has breached the duty of confidentiality. Similarly, a promise by a licensee not to disclose licensed technology is usually included in licensing agreements. Thus, a licensee--or an employee of a licensee--who discloses a trade secret learned from the licensed technology has taken by unfair means if s/he breaches a contractual duty of nondisclosure.

Hypothetical Example

A biomedical engineer (Smith) was employed by Medical Instruments, Inc. (MI). MI licensed biomedical technology from Medical Technology, Inc. (MT) explicitly to enable MI to make a medical device based on the MT technology. The MT/MI license included a provision prohibiting the disclosure of the technology by MI or its employees. Subsequently, MI reduced the number of its employees to two, and Smith, after having worked with the new technology at MI for eight months, obtained a Small Business Grant to start up his own company. Smith bought one of MI's medical devices and, by reverse engineering supplemented what he knew about the underlying technology, and then manufactured a much cheaper version of the device. MT sued MI, and both sued Smith, who argued that he created his own version of the medical device through his own expertise and reverse engineering. However, the court thought otherwise, and Smith was found liable to MI for stealing trade secrets in its medical device (which Smith learned, while employed by MI) and to MT for stealing trade secrets in its technology (which Smith also learned while employed at MI).

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