Trade Secret


The Uniform Trade Secrets Act ("UTSA") is a piece of legislation created by the Uniform Law Commission (ULC), a non-profit organization. The USTA defines trade secrets and describes claims related to trade secrets. To date, 47 states and the District of Columbia have adopted the UTSA.


The USTA defines a trade secret as: information, including a formula, pattern, compilation, program, device, method, technique, or process that:
[A.] Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
[B.] Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.


Prior to the development of the UTSA, improper use or disclosure of a trade secret was traditionally a common law tort. Sections 757 and 758 of the Restatement of Torts (1939) set forth the basic principles of trade secret law that were widely adopted by U.S. courts.


Typically, there are three essential elements to a trade secret claim:
[1] The subject matter involved must qualify for trade secret protection;
[2] The holder of the subject matter must establish that reasonable precautions were taken to prevent disclosure of the subject matter; and
[3] The trade secret holder must prove that the information was misappropriated or wrongfully taken.


Use of a trade secret belonging to another does not always constitute misappropriation. There are two basic situations in which obtaining the use of a trade secret is illegal: where it is acquired through improper means, or where it involves a breach of confidence. Trade secrets may be obtained by lawful means such as independent discovery, reverse engineering, and inadvertent disclosure resulting from the trade secret holder's failure to take reasonable protective measures. The misappropriation of trade secrets is considered a form of unfair competition and is discussed in the Restatement (Third) of Unfair Competition.


As trade secrets are generally a matter of state tort law, remedies available to an aggrieved party may vary depending upon the state and whether a violation of the Economic Espionage Act is involved. Such remedies can range from simple fines to imprisonment.


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