Timothy B. McCormack, attorney at law, writes about: The Pacific Northwest (Washington, Idaho & Oregon) [Uniform] Trade Secret Law


Timothy B. McCormack, attorney at law, writes about: Trade secrets law is concerned with the protection of technological and commercial information not generally known in the trade against unauthorized commercial use by others. The policy basis for trade secret protection is the desire to encourage research and development by providing protection to the originator of business information, and to maintain proper standards of business ethics. See Kewanee Oil Company v. Bicron Corp., 416 U.S. 470 (1990). The trade secret owner is not granted exclusivity to the information, but rather is only protected against improper acquisition and/or use of the information. As a result, others are free to discover a trade secret by any fair means.

Until relatively recently, trade secret protection had been based on common law principles; namely, trade secrets had been protected under contract, quasi-contract, and property theories. Protection of trade secrets under contract theories includes instances in which there existed an express contract concerning non-disclosure or use of a trade secret, or there existed a confidential relationship giving rise to a duty not to disclose or use the trade secret,such as an employer-employee relationship. The quasi-contract basis of trade secret protection includes avoidance of unjust enrichment from trade secret misappropriation. Finally, under the property theory, a trade secret is viewed as a property right that is subject to protective restrictions on its use and disclosure.

Perhaps the most widely used common law definition of a trade secret was set forth in the Restatement of Torts, § 757 comment b (1939):

[A trade secret is] [a]ny 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.

More recently, the Restatement of Unfair Competition, § 39 (2002), defines a trade secret with a slight difference.

A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.

Washington State is also one of the few states that recognize the theft of trade secrets as a crime. See, generally, RCW § 9A.56.010. There are no reported cases of criminal trade secret theft in Washington.

The Restatement also lists six factors to be considered in determining the existence of a trade secret:

1. the extent to which the information is known outside the business;

2. the extent to which it is known by employees and others involved in his business;

3. the extent of measure taken by the owner to guard the secrecy of the information;

4. the value of the information to the owner and to his competitors;

5. the amount of efforts or money expended by the owner in developing the information; and

6. the ease or difficulty with which the information could be properly acquired or duplicated by others.

These factors are “[t]he most-cited listing of the objective criteria for determining the existence of a trade secret.” M. Jager, Trade Secrets Law § 5.05 (1995). Note that this definition is still widely used in spite of the decision of the authors of the Restatement (Second) of Torts (1979) to omit any discussion of trade secrets.

In recent years, trade secret law has become largely statutory. The Uniform Trade Secret Act (UTSA) has now been adopted (sometimes with modifications) in 46 states and the District of Columbia. M. Jager, supra, at § 3.05 (2001). Washington adopted the UTSA as of January 1, 1982. RCW 19.108 et seq. Nonetheless, and despite the UTSA’s widespread adoption, the Restatement’s definition retains vitality and is often referred to by the courts during the course of their deliberations in applying the UTSA.

The Oregon State Trade Secrets Act was adopted in 1987 and is also based on the UTSA. See, generally, OR. Rev. Stat. §§646.461 et seq. (1998).

In slight contrast, the Idaho State Trade Secrets Act is based on the 1985 revised version of the USTA. See, generally, Idaho Code §48-801 et seq. (2002).

The UTSA defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives

Provided by McCormack Intellectual Property PS and written by Timothy B. McCormack, attorney at law and trade secret lawyer.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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