A trade secret is any business information that is not generally known and which has value, with the value being derived from the fact that the information is not generally known. One of the keys to trade secret protection, therefore, is keeping the business information from becoming generally known; or, in other words, keeping the information secret. Matters of public knowledge or general knowledge within an industry simply cannot be protected, nor can they be misappropriated.
Courts have identified a number of factors relevant to determining whether business information satisfies the secrecy requirement. These factors include:
(1) The extent to which the information is known outside of the business.
(2) The extent to which the information is known by employees and others involved in the business.
(3) The extent of the measures undertaken by an employer to protect the secrecy of the information.
(4) The value of the information to the employer.
(5) The amount of effort or money expended by the employer in developing the information.
(6) The ease or difficulty with which the information could be properly acquired or duplicated by others.
These factors are helpful in making a secrecy determination and are indeed necessary because, insofar as trade secret law is concerned, the term “secret” does not have the same meaning as one would attribute to it in everyday conversation. This is true primarily because the information does not have to remain absolutely secret in order to be deserving of protection. The definition requires that the information not be generally known. You can provide trade secreted information to others without destroying the trade secret so long as those to whom you disclose are bound by some legal compulsion not to reveal that which is disclosed. This legal compulsion is most frequently some kind of NDA or some kind of fiduciary duty, such as that owed by a lawyer to prospective, current, and former clients.
While normally no single factor is dispositive, the focus is on determining whether reasonable efforts to preserve secrecy were employed. What is deemed reasonable will vary depending upon the resources of the company claiming the trade secret and the value of the secret being protected. This is true because courts recognize a difference between a local home-cleaning business seeking to protect a customer list and the Coca-Cola Company protecting its secret formula, in terms of what is deemed reasonable in light of the surrounding circumstances. In the former, a locked file cabinet with a folder marked confidential may well be enough, depending upon other facts. In the latter, a locked file cabinet with a folder marked as confidential would certainly not be enough to protect what some consider a multi-billion dollar formula.
Although the law does not require individuals to protect against others committing crimes, a good general rule to operate under when seeking to understand the trade secret secrecy requirement is: the more likely someone is to want to steal your trade secret, the more precautions you must undertake to preserve secrecy.
Finally, one common ploy by defendants facing a trade secret misappropriation action is to challenge the existence of the trade secret in the first place. If the information was not secret, then there is no trade secret and no misappropriation. Frequently, this type of defense is successful or, at the very least, raises significant questions that must be answered by the plaintiff. The phrase “reasonable efforts to preserve secrecy” certainly means at least some efforts. Furthermore, many things that can be done to protect information cost little or nothing to implement. A folder stamped “confidential”, a locked office door, and a password-protected computer are but a few simple, extraordinarily cheap measures that must be employed if a plaintiff is ever going to have a realistic chance of demonstrating misappropriation.