Often confused with trademarks, a trade secret is a piece of confidential intellectual property that helps a business or corporation function. When a company establishes a trade secret, they reserve the private right to use the intellectual property that they created. This means that their information is legally protected and cannot be shared with any other individuals, businesses, or groups without consequences. Trade secrets are extremely common throughout your daily life and help maintain a healthy economic market.

If you operate, or plan to operate, a business, it is important to learn about how trade secrets work and what they look like.

How Does the Law Define Trade Secrets?

To understand trade secrets, you must first understand what intellectual property is. Intellectual property is a complex concept that encompasses property that is not concrete and is instead created by the human mind. This can include ideas, designs, inventions, and more.

A trade secret is a specific form of intellectual property that is used confidentially by a business or company. The Uniform Trade Secrets Act defines a trade secret as a piece of unique information that has the potential to, or already does, hold economic value because it is unknown to the public. This simply means that the information was created to benefit a business and is more advantageous to their operation by remaining private. Trade secrets include formulas, techniques, patterns, programs, and other concepts that can differentiate a company from its competitors.

Common Examples of Trade Secrets

Because trade secrets are made with human intellect, they come in a myriad of forms. The most common types of trade secrets you may be familiar with include:

1. FormulasFormulas and recipes are some of the most well-known trade secrets. For example, the acclaimed Coca-Cola soda recipe and the widely loved Big Mac sauce formula are both trade secrets. These companies realized their recipes helped them stand out, which resulted in them establishing trade secrets so their products couldn’t be recreated.
2. Programs, Algorithms, and AutomationGoogle’s search algorithm is one of the most widely used trade secrets across the world. It is a one-of-a-kind piece of coding that the company created to produce a search engine that holds an edge over their competitors. Computer programs, software, and unique automation processes are also commonly established as trade secrets.
3. Business Plans and DataMany large companies form trade secrets to protect their private information. Client lists, customer data, and methods of operation can all be set up as trade secrets because they were created by a business for their own benefit. Most companies can turn their business plans and data into trade secrets if:
   • They can prove there have been “reasonable efforts” to keep the information confidential.
   • There is financial value in the fact that it is unknown to the public.

   Facebook is a popular company that considers its business data a trade secret.

4. ProcessesWhile the term “processes” is relatively broad, many companies have established trade secrets for the exclusive processes they have formed to help them operate. For example, the process the New York Times uses to create its list of best sellers is an official trade secret. No one knows exactly how the Times compiles this list, but it is still recognized as one of the most cherished accomplishments an author can achieve. Many chain restaurants have also created trade secrets for the processes they use to cook or create certain foods.

FAQs

Q: What Are the Most Common Trade Secrets in the Food Industry?

A: The food industry is responsible for most of the trade secrets that have been established over the years. This is because special recipes and exclusive cooking processes are what help separate restaurants from one another. In addition to the Coca-Cola and Big Mac sauce recipes, some of the most widely known trade secrets in the food industry include:

• KFC’s fried chicken
• Hostess’s Twinkies
• Krispy Kreme donuts
• Pepper soda
• Hershey’s chocolate
• Thomas’ English muffins

Q: What Is the Misappropriation of Trade Secrets in Colorado?

A: Trade secrets are legally protected pieces of intellectual property that are also privately owned. This means that it is a violation of the law to inappropriately share or acquire trade secrets. If an individual discloses or obtains a trade secret without the consent of the owner, it is considered misappropriation or the illegal use of trade secrets. This can result in hefty fines or prison time.

Q: Why Do Businesses Have Trade Secrets?

A: The goal of a trade secret is to protect confidential intellectual property that helps a company profit and stand out. Without establishing a trade secret, other businesses may attempt to steal important information that helps a company operate. Trade secrets are most often created by businesses solely for their own benefit and are more advantageous when kept confidential. Otherwise, when a trade secret is shared, any company can create the same products, and the value of the information decreases.

Q: What Are the Consequences for Illegal Use of Trade Secrets in Colorado?

A: The theft or unlawful sharing of a trade secret can result in harsh legal consequences. If you are convicted of trade secret theft federally, penalties can include up to ten full years in prison. You will most likely also be required to pay fines that are up to $250,000, or twice your gross gain/the gross loss of the business. The type of fine you pay will be determined by the court and how severe the situation was. If you are convicted in state court, however, penalties will vary depending on how many prior offenses you have.

Legal Assistance for Your Intellectual Property Needs

The laws surrounding trademarks, trade secrets, and other forms of intellectual property can be difficult to understand. At Four Reasons Legal, we advocate for people, businesses, and companies looking to protect imperative information. Whether you are ready to establish a trade secret for your business or are looking to have a trademark enforced, Four Reasons Legal offers legal guidance for all kinds of intellectual property matters. For assistance regarding intellectual property in Denver, contact Four Reasons Legal to discuss your needs or schedule a phone consultation with us.