Trade Secret as Part of Intellectual Property

At the present stage of social development, information becomes a commodity, so its receipt, storage, transfer, and use obey the laws of commodity-money relations, and therefore success of any commercial activity depends on the competent handling of information flows. Every entrepreneur has the right to protect his or her interests and protect information valuable for him, receiving a certain freedom of entrepreneurship. Information becomes an independent object of business law with the emergence of new social relations.

Artisans kept secret of their mastery and skills long before the emergence of intellectual property concept throughout the world. Thus, one of the oldest methods of information protection is a legal institution of trade secrets. The institute of trade secrets refers to the special legal mechanisms for protection of not only the layer of civilized entrepreneurs, but also the interests of the country as a whole.

One can observe the difference of institutions of trade secrets and intellectual property in the following: firstly, the institution of intellectual property, with rare exceptions, guards the public information. Secondly, intellectual property is a system of exclusive rights, i.e. legal monopoly on the use of certain intangible objects. On the contrary, trade secret is private information, and there is no legal monopoly on its use.

Protection of trade secrets in the United States is carried out mainly at the level of state laws. Nevertheless, a single framework legislative act is put to the basis of local laws in most of the states (Uniform Trade Secret Act). In accordance with this act, a trade secret is defined as information (including formulas, models, programs, mechanisms, processes, and technologies) or technology that has independent economic value (actual or potential) and is not available for other persons who could benefit economically from its use or disclosure, and in respect of which the measures to protect its secrecy are taken (Holland 35).

It should be noted that legislator gives definition of information constituting a trade secret, which refers to information of any kind (industrial, technical, economic, organizational, etc.). The definition also includes results of intellectual activity in scientific and technical sphere, as well as information how to implement professional activities that have actual or potential commercial value due to being unknown to third parties. The trade secret concept also includes information, to which third parties have no free access on legal grounds. It is easy to notice the equalization of concepts ‘secrets of production’ and ‘information that constitutes a trade secret’.

As follows from the definition of trade secret, another important feature of trade secret in accordance with U.S. law is the condition of the need to take reasonable measures to ensure confidentiality of information. The law does not require provision of absolute secrecy. The number of necessary measures is defined proceeding from specific circumstances and must comply with the principle of reasonableness. In practice, ‘reasonable efforts’ mean, for example, a message to employees about the need for confidentiality, signing of confidentiality, or non-disclosure agreements, storage of classified documents ‘under lock and key’, etc. As a rule, laying off employee notifies the organization in a written form about the undertaken commitments on preserving trade secret. Head of the organization, from which the employee has left, may notify the new employer about the employee awareness in the field of commercial secrets.

It should be emphasized that courts do not always attribute the status of trade secret to information, which is considered (and indeed is) by the company valuable for realization of enterprise activity. Thus, the customer base of the company may be recognized as constituent of a trade secret only if the clients contained in it are not known in the industry or trade, can only be found using considerable organizational and financial resources and creation of that database had required a significant amount of time. In this case, the economic value of the customer base will depend exclusively on the absence of the same information in competitors’ database (Holland 48).

The law provides punishment in the form of imprisonment up to ten years and a fine of up to half a million USD for violation of rights of the trade secret owner. If subject of a crime is a juridical person, then a penalty can be up to five million USD. Increased penalties are also provided if stealing of trade secrets is carried out in the interests of foreign citizens and organizations (Yu 61). Moreover, the law provides confiscation of any property acquired in violation of rights of the holder of trade secrets, as well as used for commission of criminal acts concerned. Provisions for confiscation of property empower federal authorities with the power to seize and dismantle computer networks, printers, and other devices used to commit offenses specified by law (Yu 64).

Disclosure of trade secret information by the public authorities in the course of preliminary investigation or other investigation does not affect its legal status. Provision of information is necessary for implementation of public authorities, but legislation establishes sufficient guarantees of adequate protection of trade secrets. In addition to specially provided rules on confidentiality of information disclosed during the trial, the law establishes additional restrictions on the receipt of information by public authorities without the consent of its owner.

It also should be mentioned that American judicial practice does not give an unambiguous answer to the question whether information loses its status of trade secret in case of anonymous publication in the Internet. Thus, a number of court decisions pointed out that the denial of legal protection in this case only encourages violators of legislation to illegally publish this information in the Internet with the aim of destroying the institute of trade secrets (Yu 73).

Presence of signs of independent economic information’s value, indicated in the definition of trade secret, can be established in various ways. Thus, the assessment of the value of trade secrets may be based on the market price of transactions for transfer of similar or related information. Expenses incurred by the owner of a trade secret in the course of relevant development and research can also be taken in the calculation. If information that constitutes a trade secret was stolen and sold to third parties, this fact will be recorded in the proceedings as well as the price that was paid for to the offender (Holland 90).

Thus, the legal protection of trade secrets has the principal features: declarativeness and complexity. Nowadays, there is an urgent need for implementing measures to streamline the operations with information constituting a trade secret. Firstly, it is proposed to form a single conceptual system that can be used in all legislative acts adopted or taken in this sphere. Secondly, the law should establish a single list of specified information with a certain ratio, implementation mechanisms and establishment of responsibility for violation of restrictions on access to information, as well as mechanisms for changing modes of limited access to it.

Trade secret, as a full subject of civil law, should be institutionalized. Every person is obliged to realize deeply that any trade secret has its owner, and it shall not be disclosed without the owner’s consent. Trade secret should be a kind of the unwritten law, the foundations of which cannot be undermined.