If your company is a typical Silicon Valley tech company (or any other technology enabled business), it is likely that your most valuable asset consists of trade secrets. This category of legally protectable property includes software, algorithms, secret formulae, processes and other valuable and confidential information. The nature of ownership of trade secret, and the attribute that gives the information its commercial value, is that the owner may prevent other parties from using it.
Unlike other types of intellectual property, such as patents, trade secret protection is not established by filing. The Uniform Trade Secrets Act (“UTSA”) defines trade secrets as “information, including a formula, pattern, compilation, program, device, method, technique, or process that:
1. Derives independent economic value, actual or potential,
2. 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
3. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
The third prong of this test is the trickiest. It is easy to lose trade secret protection by failing to take steps to maintain the secrecy of the information.