Trade Secrets in California

By: Atty. Gabriel Cosh

Trade secrets are a vital part of a corporation. As the name implies, it is a secret formula, technical information or business model that the corporation must guard like a jealous lover. Otherwise, the corporation loses its edge in the cut throat world of business and corporate race. Technically, a trade secret is an intellectual property asset of the corporation. However, this asset, though very important is usually overlooked by the corporation since a trade secret is an intangible. Trade secrets are information. It is therefore easy to steal.

In California trade secret means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

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

The above definition of trade secret is an adaptation of the definition of the Uniform Trade Secrets Act (UTSA) enacted in 1984. The same is codified under Section 3426 to 3426.11 of the California Civil Code.

For an information to be considered as a trade secret, four elements must be present. The trade secret, in order to be called thus, must: (1) contain information; (2) not be generally known; (3) be treated as a secret and must be the subject of reasonable efforts to protect or maintain its secrecy; and (4) derive economic value from the fact that it is treated as a secret.

A trade secret, to be considered as consisting information, must either be a technical information or a business information.

In terms of economic value, it means simply that other corporations, businesses or competitors in general must necessarily spend time and money to develop the information.

The fact that the trade secret must generally not be known is self explanatory. If the information is known to the public, even to a few, the information is not a secret. It is the condition that the information is not generally known is what makes it a secret information. No information is secret or vital if it is already known or can easily be known by the public or even a select few.

Finally, when the trade secret is said to be the subject of reasonable efforts to maintain its secrecy, it just means that the possessor of the trade secret treats it as a secret. That the owner or possessor of the secret information expended time and money to keep the information a secret.


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