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Trade Secrets

The classic definition of a "trade secret" is contained in the Restatement 2d of Torts Section 757, comment (b)(1939):

A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process for manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers . . . A trade secret is a process or device for continuous use in the business. Generally, it relates to the production of goods, as, for example, a machine or formula for the production of an article.

Many people and business think they have "trade secrets" when, in the eyes of the law, they are not trade secrets at all. There is a six-factor test for determine whether something truly qualifies as a " trade secret ."

The Restatement 2d of Torts lists the following factors for determining whether something qualifies as a trade secret:

1. the extent to which the information is known outside the business;
2. the extent to which it is known by employees and others involved in the business;
3. the extent of the measures taken by the business to guard the secrecy of the information;
4. the value of the information to the business and its competitors;
5. the amount of effort and money expended in developing the information; and
6. the ease or difficulty with which the information could be properly acquired or duplicated by others.

If you have any questions about trade secrets, contact us at:

(512) 732-0111