What is a Trade Secret?

We are often asked, what is a trade secret? A trade secret is a form of intellectual property protected by state law, not registered with the federal government, like trademarks, copyrights, or patents. Michigan has adopted the Michigan Uniform Trade Secrets Act to protect businesses’ private information.

One of the most litigated areas of trade secret cases, including the misappropriation of trade secrets,  turns on whether the information at issue constitutes a protectable trade secret.

So, what is a trade secret under Michigan law?

Trade Secret – Definition

Michigan law defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following:

(i) Derives independent 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.

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

Trade Secret Examples

Confidential Information

Confidential information, alone, is not necessarily protectable as a trade secret. Most businesses have large amounts of confidential information. For example, employment terms and salary considerations are generally held in confidence, however, this alone does not render the item a protectable trade secret. The definition of trade secret is intended to delineate a more narrow class of information, specifically a type of process, pattern, or plan.

The improper disclosure of confidential information can for the basis of a number of other claims. Prepared businesses have a confidentiality agreement in place that provides for specific penalties for the unauthorized disclosure of confidential information. If such an agreement is not in place, causes of action for breach of fiduciary duty, conversion, or unjust enrichment may remain.

Matters of General Knowledge in the Industry

Employees are not required to simply forget what they have learned on the job. If someone works for an extended period of time in a particular industry, the employee will likely obtain general knowledge about the industry the layperson would not possess. This is not a protectable trade secret.

But, a thin line separates general knowledge of the industry and a secret process or formula used within a specific business. A fact intensive analysis is required to distinguish between general information and a protectable trade secret.

Customer Lists

Are customer lists a trade secret? Yes and no. The Eastern District of Michigan, in Wysong Corp v MI Indus, 412 F Supp 2d 612, 629-30 (ED Mich 2005), held that “customer lists developed by a former employee and information relating to a customer’s needs are not ‘trade secrets’ under the MUTSA unless the employee is bound by a confidentiality agreement.”

This presents another reason why employers should take steps to draft enforceable confidentiality agreements with all employees.

Vendor Lists

An issue common with the determination of whether a vendor list constitutes a trade secret lies in the general availability of the information contained on the vendor list. For example, if a business lists its customer or vendor list on its website, and that website is open to the general public, that information is not a secret, and thus, not protectable.

The same idea applies to vendor lists that are made available through other means, including trade shows, conventions, and other public forums.

Trade Secret Litigation

If you are asking what is a trade secret, you should consult with an attorney today. Revision Legal has experience protecting business information and defending former employees alleged to have misappropriated trade secrets.

If you are facing a trade secret issue in Michigan, contact our trade secret attorneys today by completing the contact form on this page or by calling the number above.