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Understanding Trade Secrets

A trade secret or ‘confidential information’ is a form of intellectual property that gives the firm who owns it an advantage over its competitors as long as the firm manages to keep it a secret. The intellectual property protected under trade secret protection does not have to satisfy any requirements of novelty, utility or non-obviousness. The only requirements are that there is no prior art or prior disclosure (that is, the information has the quality of being secret) and that the owner has been taking reasonable measures to maintain secrecy.

Trade Secret law is basically about the ‘what’ and the ‘how’. The ‘what’ is the subject matter that qualifies as a ‘trade secret. The ‘how’ is the method by which the bad guy (a person who is misappropriating in trade secret parlance) improperly acquired, used or disclosed the trade secret. Trade secrets are valuable business assets to both innovative and non-innovative firms. As valuable business assets, trade secrets play an important role in economic growth and fostering innovation. “Trade Secrets” is that genre of information that is hard to define, classify and ascertain.

The uniqueness of trade secrets is that it fits into one or more parameters of intellectual property, competition, contract and innovation. This varied nature of trade secrets calls for a comprehensive interpretation from a holistic perspective. Any attempt towards the protection of such a genre of intellectual property should not be incentive based. Before proceeding to the essential characters of ‘trade secrets’ an outlook of intellectual property as a whole becomes essential.  Intellectual property, in a legal sense, is something that can be owned and dealt with. Statutory forms of IP are declared to be property rights. In certain instances, assignment of these IP rights is governed by the statutory norms and where this is so, assignment requires no consideration. Almost all forms of IP extend some private rights to its respective owner, while some forms of IP have been extended by the statute itself. While specific legislations are made available for the protection of various forms of IP, protection of the trade secrets varies from country to country. However, within the limits of this research report, trade secrets are considered from some important facets of intellectual property mechanism.

The term ‘trade secrets’ is defined as (1) any information (2) that is secret, (3) derives economic value from that secrecy, and (4) is the subject of reasonable measures to maintain its secrecy.

In the present scenario and even in coming future, companies rely on trade secrets to protect their valuable information, and increasingly the turn on the courts to enforce those trade secrets. Trade secrets are rapidly becoming IP of choice due to their advantages in information economy. Machinery and mechanisms were the assets of the ‘industrial age’ that required the provisions of patent law to protect them. In this perspective, US courts have held, ‘the extent of a property right in a trade secret is determined by the extent to which the owner of the secret protects his interest from disclosure to others’. It is however accepted that trade secrets are different from other forms of IP. To argue, patents require that the inventions be novel, useful and non-obvious, trademarks protects only the printed word or image representing a product or service and copyrights protects only the manner of expression and not the content, idea, information or the concept being communicated. As researchers argue, trade secrets may or may not be novel; meaning thereby that they may or may not meet the criteria of IP regime but still deserve protection because of their industrial utility.

Considering the above visions, it is to be noted that some properties are not intellectual in their nature but are just ‘usufructs’ i.e. a right to use an asset, continue using the asset, and to be free from attempts to divert one’s efforts to extract benefits from the assets. In such a dialogue, there comes the divergence on protection of trade secrets. It has to be clarified, before attempts are being made that such an alleged protection would give a right to exclude others from using the secret or a right to prevent others from accessing the secret. If we consider a trade secret to be a form of property, then that property belongs to the industry and not to a real self. However, IP regime recognizes the very person behind the invention, literary work or a trademark etc. The agenda loses its significance when one notes that in most of the cases of trade secret misuse, the parties were relational, either in a licensing agreement or in an employer-employee relationship. It thus prompts that trade secrets are not available in general but have an industrial limitation. In such a paradox, in rem and in personam operations of trade secrets law should be objectively understood. In most of the cases also, breach of confidentiality has been alleged to be a violation of trade secrets. However, it still remains unclear as to what was argued to be a secret.

This brings us to the forefront, looking into what is worth of protection? If we look through an IP perspective, trade secrets fall short in fulfilling the requirements of the regime, and if test a sui generis system, we still account for the protectable subject matter. In both the situationsFree Articles, trade secrets are essentially observed to be a mere practice of confidentiality and breach of which is actionable under the law of contract. It is also to be tested that whether any confidential information would become a trade secret or it requires some industrial utility which demands the essential foreclosure.


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Bharat Kumar Singh is currently perusing B.A., L.L.B. (Hons.) from National University of Study and Research in law, Ranchi. He is an avid blogger and adding to his interests administers a website on his name that works in the field of advocating basic legal education to the beginners. He has taken part in various moot court competitions and has attended multi-dimensional seminars and conferences across his country. He also vigorously handles various committees and centers actively running in his Law College. In his specialization course, Bharat has opted for Intellectual Property Rights with his keen interest in the technological sector that he thinks will unlimitedly boost in the near future. Apart from his IPR studies, Bharat has also published various research papers in the field of Human Rights Law, Constitutional Law and Tort Law.

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