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What Happens if My Trade Secret is Publicly Disclosed?

By John DiGiacomo

The answer depends on how the trade secret became publicly disclosed.

As defined legally, a trade secret is any sort of information that has commercial value from the fact that the information is secret. The law protects trade secrets. However, if the information becomes known publicly through disclosure, then, generally, the status of the information as a “trade secret” is lost. The trade secret is no longer secret, and no longer has legal protection as a trade secret.

Thus, if the information was voluntarily disclosed to the public, then the information is no longer a trade secret and has no legal protection. The same is generally true if a trade secret becomes public through inadvertence or accident. As noted, the general rule is that, upon disclosure, even if inadvertent or accidental, information disclosed ceases to be a trade secret and will no longer have legal protection.

However, accidental disclosure does not always result in the loss of the trade secret. In most cases, this is a fact question. This is because, as a specific requirement for legal protection, the owner of a trade secret must take “reasonable measures” to protect the secrecy of the information. Obviously, voluntary disclosure of the information vitiates and nullifies any “reasonable measure” to protect the secrecy of the information. And, often, the same is true for inadvertent or accidental disclosure. If security measures are “reasonable,” then those measures should protect against inadvertence or accident. If the security measures do not protect against inadvertence or accident, then the security measures can be deemed to be “unreasonable.” This is what happened in the case of Defiance Button Machine Co. v. C & C Metal Prod. Corp., 759 F.2d 1053 (2d Cir. 1985). In that case, customer lists were contained on a computer and the computer was sold. The owner did not erase the computer memory/hard-drive before the sale. The customer lists became public and the owner claimed that its trade secrets had been misappropriated. However, the court held that, even if the disclosure was accidental, by failing to erase the computer memory, the owner had not used “reasonable measures” to keep the customer lists secret. As such, the customer lists lost their status as trade secrets.

However, in a different case, customer lists did NOT lose their status as trade secrets even though they were found in the trash. The owner made a factual demonstration that it had procedures in place requiring the shredding and destruction of customer list information before being placed in the trash. This was sufficient for the court to deem the customer lists to be still deemed trade secrets. See BC Ziegler & Co. v. Ehren, 414 N.W.2d 48 (Wis. App. 1987).

What if a third party discloses my trade secret?

Again, the answer depends on how the third party obtained your information protected as a trade secret. If the third party obtained the information unlawfully, then you can sue the third party for misappropriation of trade secrets. But, if the information was obtained lawfully, by, for example, reverse engineering, then there is no claim for misappropriation of trade secrets. In either circumstance, because the information is now public, the information has lost its status as a trade secret.

If you have questions about protecting your trade secrets or if you need to initiate trade secret litigation, contact the trade secret lawyers at Revision Legal at 231-714-0100.

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