The United States is a country built on entrepreneurship and inventions. Many hockey players would say the best US invention is the Zamboni. During July in Maryland, my favorite invention is air-conditioning! From cars to airplanes to even crayons, American businesses have developed wonderful ideas, processes and trade secrets to make their company’s profitable. But failing to protect a company’s trade secrets can cost companies to lose their competitive edge.
Take the recent case of Pay Pal vs. Google. Pay Pal sued Google in May 2011 on the same day Google unveiled a phone-based mobile payment system called Google Wallet. Pay Pal claims that it was in talks with Google to buy the system when the deal fell threw and Google started to create its own system using two employees the internet search company lured away from Pay Pal. A California judge will have to decide if Google violated the Uniform Trade Secret Act.
While this is an example from two global companies, companies of all sizes need to protect their secrets. Secrets are what distinguishes one company from the next and at the end of the day protecting trade secrets boils down to protecting your company’s profitability and bottom line.
But what are trade secrets? Trade secrets protections are older than the United States and existed in the English Common Law. In the early 1930s the Restatement of Torts recognized trade secrets. It allowed for all kinds of methods of manufacturing including customer lists and future business plans to be considered a trade secret.
The courts in a wide range of circumstances have enforced trade secrets. For example the method for presorting mail which included the choice of the type of business that high density zip codes as well as sorting boxes which provided for the most dense zip codes to be in the upper right hand corner so that right handed mail sorter could most easily handle this volume of mail into the easiest box was considered a trade secret in the Maryland Tabs Associates, Inc. vs. Brohawn 50MD.APP.330,475A.2D1203(1984).
In the 1950s and thereafter the Uniform Trade Secret Act was passed, and adopted by the majority of states, has identified trade secrets as “ information pattern compilation program, device, method, technic or process.” It’s a very broad definition to say the least.
But not all secrets are trade secrets. The definition for trade secret establishes that the trade secret must have ”independent economic value.” But the crucial factor in trade secrets is that the business must make efforts that are reasonable under the circumstances to maintain its secrecy.
Cases have identified secrecy as requiring restrictive covenants in employment agreements or keeping processes and methods under lock and key. As long as these components are met and the trade secret is truly kept secret it is protectable forever.
But how do you know what secrets can protect and what are open to the public? Simply said a trade secret is an idea that a business is a source of profit for a business that it keeps secret.
On the other hand if a business in Maryland develops a process and keeps it secret and a business in California develops the exact same process on its own both of them have trade secret protection from the outside world and each other.
To succeed in today’s business climate, companies must protect their trade secrets. This protection gives companies a financial advantage against their competitors.
For more information, please contact Robert R. Bowie, Jr. at email@example.com.