Most businesses are familiar with the concept of a trade secret, but few can accurately define the legal meaning of the term.  Those seeking protection will claim that basically all of their business information qualifies as a trade secret, while defendants fighting a claim will argue that the requirements for something to be a trade secret are extremely restrictive. The answer, of course, is somewhere in the middle.  So, what exactly constitutes a trade secret?

The Uniform Trade Secrets Act has been adopted by 46 states (all except New York, Massachusetts, North Carolina and Texas).  Georgia’s version of the Act defines a trade secret as follows:

“Trade secret” means information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:

(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

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

Whether or not a supposed trade secret satisfies the definition of a trade secret often decides the winners and losers in trade secret disputes.  Here are some examples of decisions by state and Federal courts in Georgia regarding the determination of a trade secret:

Items Ruled as Trade Secrets

• Written, or electronically-stored, customer lists, if not readily available to the public
• Computer software
• Packaging idea
• Logistics system
• Healthcare provider’s referral log and workbook containing doctor referral statistics

Not a Trade Secret

• Intangible customer information existing in the mind of the former employee
• Recollection of cities that franchisor considered to be good location for future franchises (deemed to be similar to intangible customer information, and thus not protectable)
• Accumulated technical information in employee’s mind
• A particular bearing in a cleaning system  (since bearing was stamped with the name of a third party, anyone could call the bearing manufacturer to find out the specifications of the bearing)
• Name for future newspaper planned by publisher
• Matters generally known in the industry
• Process of evaluating amount to bid on tax deeds   (the information was available to the public, and the process was not a unique combination affording possessor a competitive advantage)
• A customer list that does not provide a competitive advantage (even though it was not publicly available)
• Investor lists

BURR POINT:  The Uniform Trade Secret Act can be a powerful tool for protecting a confidential business and customer information, but claiming a trade secret and meeting the legal definition of same are two different matters.  Businesses of all types would be well-served to have an attorney review their processes, employment agreements and policies to ensure they are set up to take full advantage of the protection that trade secrets laws provide.