TRADE SECRET
DEFINITION
A trade secret is confidential business information that derives economic value from not being publicly known, and that its owner takes reasonable steps to keep secret. Unlike patents or copyright, trade secret protection has no registration and no fixed term; it lasts as long as the secrecy does.
WHAT IT MEANS IN PRACTICE
Trade secret protection covers things like formulas, source code, customer lists, and internal processes, provided they are genuinely kept confidential through measures like NDAs, access controls, and internal policy. Declaring something secret after the fact does not count.
In the US, trade secrets are protected under both state law and the federal Defend Trade Secrets Act, which allows civil suits for misappropriation. In the EU, the 2016 Trade Secrets Directive harmonised protection across member states, defining a trade secret in largely similar terms to US law, requiring secrecy, commercial value, and reasonable protective steps.
Trade secret protection ends the instant the information becomes public, whether through a leak, reverse engineering, or independent discovery by someone else, which is the key tradeoff against a patent: a patent is public and time-limited, a trade secret is private and can last indefinitely, but only until it stops being secret.
Reverse engineering a product to figure out how it works is generally lawful and does not violate trade secret law, unlike misappropriation through theft or breach of a confidentiality agreement.
AN EXAMPLE
A beverage company keeps its flavour formula as a trade secret rather than patenting it, restricting knowledge of the full recipe to a handful of employees under strict confidentiality agreements. Because no patent was filed, the formula could theoretically remain protected indefinitely, but only for as long as no one leaks it or independently reverse-engineers it.
WATCH OUT
Simply calling information 'confidential' in a document is not enough; without real, demonstrable protective measures, a court may find there was no trade secret to misappropriate.
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