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Trade Secrets and California Law – Defining Trade Secrets

For many businesses, success depends upon keeping certain, key pieces of company information strictly in-house.   This information might be a certain technique or formula used to create a product, a client list, or a business plan- all of these could indeed represent “trade secrets.”  Yet there is no hard-and-fast list of types of information that are uniformly labeled as trade secrets.  Rather, the information must fit into the definition set forth in California Civil Code Section 3426-3426.11, known as the Uniform Trade Secrets Act, or UTSA.

This section of law provides a definition for the legal term--“trade secret.”

Civil Code Section 3426.1(d) defines a “trade secret" to mean any 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 persons who can obtain economic value from its disclosure or use; and

(2) The information is the subject of efforts to maintain its secrecy.

Ultimately, this means a certain “type” of information, for example, market research, could be proved to be a trade secret in one case, but not a trade secret in another case.  If the legal requirements above are not met, then the information cannot be considered a true trade secret.

For forward-thinking business owners, this means measures should be taken in anticipation of a trade secret being misappropriated before it happens.  As examples, a couple good ways to put forth “efforts to maintain” the secrecy of a trade secret would be to make employees sign a confidentiality agreement upon being hired and labeling all documents or objects with clear and bold headings of “CONFIDENTIAL” and “PROTECTED TRADE SECRET INFORMATION.”

For more information regarding trade secrets, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.

Business owners might also be interested in this article about employee classification, or this article on business collections. Be sure to check out the complete list of business-related articles!

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