What Are Trade Secrets?

Updated: Dec 6, 2019

A trade secret is information that has application in trade, business or industry that has economic value and is not publicly available. If a company’s trade secret is misused then the economic value of the trade secret is lost and the goodwill of the company is damaged. Use, appropriation and disclosure of a trade secret are illegal.

Where copyrighted matter deals in a company trade secret but the copyright belongs to the employee, that employee may not reveal it or copy it as he or she pleases.

The following mechanisms can be put in place to protect trade secrets:

1) Restraint of Trade

A restraint of trade agreement occurs when the seller of a company agrees not to carry on a similar and competitive business with the purchaser of the company, or, where an employee agrees not to start a competing business or enter into the service of a competing business to the employer’s business. Such an agreement seeks to protect the trade secrets of the company. Violation of a Restraint of Trade Agreement may result in the abuse of intellectual property rights.

2) Non-Disclosure Agreements

When an innovator has to disclose intellectual property to another party in the course of business or to get financial or marketing advice, they put themselves at risk in that their ideas may be copied. A non- disclosure agreement creates confidentiality between you and the person with whom you have shared your idea.

3) Contractual limitations on Solicitation of Employees

Companies may enter into agreements, restricting the soliciting of each other’s employees.

To note: 

Reverse Engineering is a ground for justification for the infringement of a trade secret. Reverse engineering is the discovery of a trade secret by independent examination of a product that contains the trade secret.Industrial Espionage occurs when one enterprise spies on another in order to obtain intellectual property such as customer lists and trade secrets so as to gain a competitive advantage.