Appendix A to Subpart A of Part 350 - Restatement of Torts Section 757, Comment b
40:30.0.1.1.10.1.9.17.13 : Appendix A
Appendix A to Subpart A of Part 350 - Restatement of Torts Section
757, Comment b
b. Definition of trade secret. A trade secret may consist of any
formula, pattern, device or compilation of information which is
used in one's business, and which gives him an opportunity to
obtain an advantage over competitors who do not know or use it. It
may be a formula for a chemical compound, a process of
manufacturing, treating or preserving materials, a pattern for a
machine or other device, or a list of customers. It differs from
other secret information in a business (see section 759) in that it
is not simply information as to single or ephemeral events in the
conduct of the business, as, for example, the amount or other terms
of a secret bid for a contract or the salary of certain employees,
or the security investments made or contemplated, or the date fixed
for the announcement of a new policy or for bringing out a new
model or the like. A trade secret is a process or device for
continuous use in the operation of the business. Generally it
relates to the production of goods, as, for example, a machine or
formula for the production of an article. It may, however, relate
to the sale of goods or to other operations in the business, such
as a code for determining discounts, rebates or other concessions
in a price list or catalogue, or a list of specialized customers,
or a method of bookkeeping or other office management.
Secrecy. The subject matter of a trade secret must be secret.
Matters of public knowledge or of general knowledge in an industry
cannot be appropriated by one as his secret. Matters which are
completely disclosed by the goods which one markets cannot be his
secret. Substantially, a trade secret is known only in the
particular business in which it is used. It is not requisite that
only the proprietor of the business know it. He may, without losing
his protection, communicate it to employees involved in its use. He
may likewise communicate it to others pledged to secrecy. Others
may also know of it independently, as, for example, when they have
discovered the process or formula by independent invention and are
keeping it secret. Nevertheless, a substantial element of secrecy
must exist, so that, except by the use of improper means, there
would be difficulty in acquiring the information. An exact
definition of a trade secret is not possible. Some factors to be
considered in determining whether given information is one's trade
secret are: (1) The extent to which the information is known
outside of his business; (2) the extent to which it is known by
employees and others involved in his business; (3) the extent of
measures taken by him to guard the secrecy of the information; (4)
the value of the information to him and to his competitors; (5) the
amount of effort or money expended by him in developing the
information; (6) the ease or difficulty with which the information
could be properly acquired or duplicated by others.
Novelty and prior art. A trade secret may be a device or process
which is patentable; but it need not be that. It may be a device or
process which is clearly anticipated in the prior art or one which
is merely a mechanical improvement that a good mechanic can make.
Novelty and invention are not requisite for a trade secret as they
are for patentability. These requirements are essential to
patentability because a patent protects against unlicensed use of
the patented device or process even by one who discovers it
properly through independent research. The patent monopoly is a
reward to the inventor. But such is not the case with a trade
secret. Its protection is not based on a policy of rewarding or
otherwise encouraging the development of secret processes or
devices. The protection is merely against breach of faith and
reprehensible means of learning another's secret. For this limited
protection it is not appropriate to require also the kind of
novelty and invention which is a requisite of patentability. The
nature of the secret is, however, an important factor in
determining the kind of relief that is appropriate against one who
is subject to liability under the rule stated in this section.
Thus, if the secret consists of a device or process which is a
novel invention, one who acquires the secret wrongfully is
ordinarily enjoined from further use of it and is required to
account for the profits derived from his past use. If, on the other
hand, the secret consists of mechanical improvements that a good
mechanic can make without resort to the secret, the wrongdoer's
liability may be limited to damages, and an injunction against
future use of the improvements made with the aid of the secret may
be inappropriate.