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Concept
Trade secret
Summary
A trade secret is an intellectual property that has inherent economic value because it is not generally known or readily ascertainable by others, and which the owner takes reasonable measures to keep secret. Types of trade secret include includes formulas, practices, processes, designs, instruments, patterns, or compilations of information.
Intellectual property law gives the owner of a trade secret the right to restrict others from disclosing it. 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:
is not generally known to the public;
confers economic benefit on its holder the information is not publicly known; and
where the holder makes reasonable efforts to maintain its secrecy.
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 (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. Still, research shows that changes in trade secrets laws affect business spending on R&D and patents. This research provides indirect evidence of the value of trade secrecy.
In contrast to registered intellectual property, trade secrets are, by definition, not disclosed to the world at large.
Official source
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