Along with copyrights, trademarks and patents, trade secrets are a type of intellectual property used in business. Both the laws of the United States and international law afford businesses a degree of protection for their trade secrets.
The definition of a trade secret is rather broad. The term can apply to compilations, devices, formulas, methods, patterns and programs used in either a commercial or an industrial context. Essentially, according to the World Intellectual Property Organization, a trade secret is information that gives a business a competitive edge by virtue of its confidentiality. The use of a trade secret by an unauthorized person represents an unfair business practice.
However, protection for trade secrets can be somewhat limited in scope. The United States Patent and Trademark Office explains that it is not possible to protect trade secrets once they become generally known, independently discovered or if the holder of the information fails to maintain secrecy. It is only possible to protect trade secrets from misappropriation, i.e., use of the information by an unauthorized party.
Nevertheless, the World Trade Organization requires its members, including the United States, to provide protection for trade secrets to the extent possible. In 2016, the United States strengthened its trade secret protection by enacting the Defend Trade Secrets Act, which allowed federal courts to hear localized trade secret disputes under state law.
Under the law, courts can require an entity that has misappropriated a trade secret to pay reasonable attorney’s fees, court costs and damages to the original holder of the trade secret. The courts can also order parties to pay royalties to the original owner, as well as to take steps to maintain its secrecy.