Trade Secret Theft Can Be A Big Deal

By Debby Winters

Most of the time that I write about IP, it is about patents, trademarks, or copyright, but a fourth form of IP that doesn’t get talked about much does exist. That’s the intellectual property protection of trade secrets. There are many companies that protect their IP with Trade Secret protection.  If you don’t know of any, think Coca Cola’s trade secret formula or Google’s proprietary search algorithm, for example.  Trade Secret is defined in the  Uniform Trade Secrets Act (“UTSA”)  as:

  • information, including a formula, pattern, compilation, program, device, method, technique, or process,
  • that derives independent economic value, actual or potential, from not being generally known to or readily ascertainable through appropriate means by other persons who might obtain economic value from its disclosure or use; and
  • is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

One of the problems with enforcing trade secret law is that it is largely state-based law, unlike Trademark, Copyright, or Patent law.  While there has been a push to nationalize trade secret law,  that hasn’t been accomplished. Most states have adopted some form of the UTSA, giving companies some form of uniform way to recover damages from such theft.

Often employees steal these trade secrets to sell to the “enemy” for big bucks.  It happened recently to Dupont with their formula and process of making their “white” color from TiO2. And it happened to Coca Cola in 2006.  In some cases, the competitor is the one who notifies the company of the theft, but not usually. In 2006, when Pepsi, the usual bitter enemy of Coke got a letter offering Coke trade secrets, it went straight to its corporate rival. But if you protect your trade secrets in this manner, don’t expect your theft to turn out this way, Dupont’s certainly didn’t.

This is an interesting form of IP protection but a risky one to pursue, as the usual damage that occurs is the theft and sale of the “secret” to a competitor.  For more information on trade secret law, feel free to contact me or comment below. For more details on the Coca Cola or Dupont stories, click on the links above.