Definition of "Trade
Secret " 1910.1200 Appendix E (Mandatory)
The following is a reprint of the
"Restatement of Torts" section 757, comment b (1939):
b. "Definition of trade
secret." A trade secret may consist of any formula,
pattern, device or compilation of information which is used
in one's business, and which gives him an opportunity to obtain
an advantage over competitors who do not know or use it. It
may be a formula for a chemical compound, a process of manufacturing,
treating or preserving materials, a pattern for a machine
or other device, or a list of customers. It differs from other
secret information in a business (see s759 of the Restatement
of Torts which is not included in this Appendix) in that it
is not simply information as to single or ephemeral events
in the conduct of the business, as, for example, the amount
or other terms of a secret bid for a contract or the salary
of certain employees, or the security investments made or
contemplated, or the date fixed for the announcement of a
new policy or for bringing out a new model or the like. A
trade secret is a process or device for continuous use in
the operations of the business. Generally it relates to the
production of goods, as, for example, a machine or formula
for the production of an article. It may, however, relate
to the sale of goods or to other operations in the business,
such as a code for determining discounts, rebates or other
concessions in a price list or catalogue, or a list of specialized
customers, or a method of bookkeeping or other office management.
"Secrecy." The
subject matter of a trade secret must be secret. Matters of
public knowledge or of general knowledge in an industry cannot
be appropriated by one as his secret. Matters which are completely
disclosed by the goods which one markets cannot be his secret.
Substantially, a trade secret is known only in the particular
business in which it is used. It is not requisite that only
the proprietor of the business know it. He may, without losing
his protection, communicate it to employees involved in its
use. He may likewise communicate it to others pledged to secrecy.
Others may also know of it independently, as, for example,
when they have discovered the process or formula by independent
invention and are keeping it secret. Nevertheless, a substantial
element of secrecy must exist, so that, except by the use
of improper means, there would be difficulty in acquiring
the information. An exact definition of a trade secret is
not possible. Some factors to be considered in determining
whether given information is one's trade secret are: (1) The
extent to which the information is known outside of his business;
(2) the extent to which it is known by employees and others
involved in his business; (3) the extent of measures taken
by him to guard the secrecy of the information; (4) the value
of the information to him and his competitors; (5) the amount
of effort or money expended by him in developing the information;
(6) the ease or difficulty with which the information could
be properly acquired or duplicated by others.
"Novelty and prior art."
A trade secret may be a device or process which is patentable;
but it need not be that. It may be a device or process which
is clearly anticipated in the prior art or one which is merely
a mechanical improvement that a good mechanic can make. Novelty
and invention are not requisite for a trade secret as they
are for patentability. These requirements are essential to
patentability because a patent protects against unlicensed
use of the patented device or process even by one who discovers
it properly through independent research. The patent monopoly
is a reward to the inventor. But such is not the case with
a trade secret. Its protection is not based on a policy of
rewarding or otherwise encouraging the development of secret
processes or devices. The protection is merely against breach
of faith and reprehensible means of learning another's secret.
For this limited protection it is not appropriate to require
also the kind of novelty and invention which is a requisite
of patentability. The nature of the secret is, however, an
important factor in determining the kind of relief that is
appropriate against one who is subject to liability under
the rule stated in this Section. Thus, if the secret consists
of a device or process which is a novel invention, one who
acquires the secret wrongfully is ordinarily enjoined from
further use of it and is required to account for the profits
derived from his past use. If, on the other hand, the secret
consists of mechanical improvements that a good mechanic can
make without resort to the secret, the wrongdoer's liability
may be limited to damages, and an injunction against future
use of the improvements made with the aid of the secret may
be inappropriate.
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