Trade-secret

A trade secret is a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information not generally known or reasonably ascertainable by others by which a business can obtain an economic advantage over competitors or customers. In some jurisdictions, such secrets are referred to as confidential information.

The precise language by which a trade secret is defined varies by jurisdiction, as do the particular types of information that are subject to trade secret protection. Three factors are common to all such definitions:

A trade secret is information that

In international law, these three factors define a trade secret under article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, commonly referred to as the TRIPS Agreement.

Similarly, in the United States Economic Espionage Act of 1996, "A trade secret, as defined under 18 U.S.C. § 1839(3)(A),(B) (1996), has three parts: (1) information; (2) reasonable measures taken to protect the information; and (3) which derives independent economic value from not being publicly known."

Trade secrets are an important, but invisible component of a company's intellectual property (IP). Their contribution to a company's value, measured as its market capitalization, can be major. Being invisible, that contribution is hard to measure. Patents are a visible contribution, but delayed, and unsuitable for internal innovations. Having an internal scoreboard provides insight into the cost of risks of employees leaving to serve or start competing ventures.

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