What does this mean?
Trade secrets are pieces of information that meet these elements. They must meet all three to be valid:
- It has economic value because it’s secret: The information has to give you an economic advantage because of the fact that you’re the only one who knows it. To test this, imagine if everyone had that information, would you be able to keep your advantage or no? If you would - then its value is not in being secret. A good example is a secret ingredient or a secret recipe. It give you an advantage because you’re the only one who can make it. If everyone knew how to make the secret dish exactly like you do it - then you lose your advantage.
- It should not be readily known or “knowable” by others: the information shouldn’t be readily available. If some people know about it or can find it relatively easily, then it’s “readily known” or “knowable” so won’t constitute a trade secret.
- Steps are taken in order to protect it: Finally, you have to take steps to protect your trade secret. We have a checklist of what steps to take to do this. But generally speaking, you need to protect it from people finding it out easily--both physically and legally.
Does this apply to me?
For almost 100% of companies, yes. If you have any information that’s valuable to you, including plans, formulas, techniques, recipes, process, customer lists, designs, prototypes, or any other types of information, then it applies.
Why is making this mistake going to harm my business?
If your information isn’t a trade secret, then you lose a lot of value in your business. There’s no registration or regulatory body where you can go to to have them declare that your confidential info is a trade secret. You only find this out when you go to court in a lawsuit relevant to the information. And by then, if the requirements are not met, it will be too late. Especially when it comes to the third requirement, that steps should have been taken to protect the info, you should have done this from the start in order for your info to be considered as trade secret.
You could avoid this by:
Following the three steps required for your information to be a trade secret.
Will had come up with a “genius” idea -- or so he thought. His product automated the automation of sales. So Will’s idea was to create the ultimate customer list of what he thought his target audience was -- sales people. So he simply looked in the Yellow Pages Phone Book to see what companies had the title “sales” somewhere in their name and created a list.
He guarded the list like it was page with a series of bitcoin addresses and had a print copy he kept in a safety deposit box. A year into his business, he noticed that another company in the same city was “stealing” some of his customers. He assumed they must’ve somehow stolen his customer list and sued the company for stealing his trade secret.
The other company got the case dismissed with no problem once the court determined that Will had created his customer list from the phone book. It found that Will’s alleged “information” that was supposed to be “secret” had no economic value from being secret and that it was clearly known by others--it was public information!
Will thought that just because he protected his information that meant it was a trade secret, but he didn’t know that the information originally had to be something confidential and that it needed to be economically viable.