What is a Trade Secret?

The California Uniform Trade Secrets Act (CUTSA) has a very precise definition of a “trade secret,” but to understand the concept of a trade secret, it is easier to begin with a short-hand description.  A “trade secret” is information that gives its owner economic value because it is secret.  The owner must use reasonable efforts to maintain its secrecy.

Here is the more precise legal definition of a “trade secret” in CUTSA:

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The legal definition may not be as helpful as listing some examples of trade secrets (assuming they meet the legal test for trade secret protection):
Formulas, such as the famous formula for Coca-Cola, which may be for food, drinks, chemicals, or drugs.
Computer software source code, which is a key trade secret asset of Silicon Valley businesses.

• Formulas, such as the famous formula for Coca-Cola, which may be for food, drinks, chemicals, or drugs.
• Computer software source code, which is a key trade secret asset of Silicon Valley businesses.
• Technology, such as processes or methods to do something.
• A device or machine.
• Techniques or know-how, which are often used in manufacturing processes.
• Business plans.
• Financial information about a business.
• Customer lists.
• Human resources information, such as the identity of a business’ key employees, their salaries, and special skills.

“Trade secrets” are not necessarily the same as information protected by a confidentiality agreement.  A nondisclosure may call for the recipient of information to keep it confidential, but if doesn’t meet the other criteria (gives economic value because of secrecy and was protected by reasonable security measures), it may not rise to the level of a trade secret.  The recipient may have a duty under the contract to keep this information confidential, but if it discloses the information, it would not be liable for trade secret misappropriation.

Contact Us

If you would like to speak with an experienced trade secret lawyer about what information is a “trade secret,” please contact us.