A trade secret is a process, formula, design, practice, instrument, compilation of information or pattern which is not usually recognized or sensibly ascertainable, by which a business can obtain an economic advantage over competitors or customers.
In a number of jurisdictions, such trade secrets are referred to as "classified information" or " confidential information". The trade secret initially came into existence in the year 1817 in England.
Three factors in the trade secret:
The precise language by which a trade secret is defined varies by jurisdiction. On the other hand, there are three factors that are common to all such definitions: a trade secret is information that:
Trade secret according to US Law:
“According to the US Law under “18 U.S.C. § 1839(3) (A), (B) (1996),” it has three parts namely: (1) information; (2) reasonable measures taken to protect the information; and (3) which derives independent economic value from not being publicly known.”
Through the non-compete and non-disclosure contracts with the employees the companies can protect their confidential information.
The trade secrets are safeguarded under the state laws, and the majority of the states have ratified the Uniform Trade Secrets Act (UTSA), but there is an exception in some of the states like Texas, North Carolina, Massachusetts, New Jersey and New York.
Going against the agreement in general leads to high financial penalties. A holder of a trade secret may perhaps in addition requires parallel agreements from the additional parties which he deals with, such as licensees or vendors.
Companies over and over again make an effort to find out one another's trade secrets all the way through the reverse engineering which is considered to be a lawful method whereas on the other hand potentially the unlawful methods include the industrial espionage on the other. According to the governing laws the acts of the industrial espionage is in general illegal.