Trade Secrets:

Copyright(c), 1990, 1995 Fred Cohen - All Rights Reserved

Trade secret laws are designed to allow the owner of intellectual property to protect that property from being publicized while maintaining control over its use and distribution. The basic principle of trade secrets is that a legal contract to keep information secret, when violated by an intentional act, can be used as the basis for legal action to recover damages from the violator. A trade secret lasts as long as the information is kept secret. Thus as soon as it is available to the public, no legal protection remains except against the person who caused the information to be released in violation of the contract. On the other hand, trade secrets remain trade secrets for any length of time, and thus there is no statute of limitations on their duration. The formula for Coca Cola is an example of a trade secret, in that the formula is held only by a limited number of bonded people who have contracted to keep the formula secret.

Trade secrets have many difficulties in widely marketed products, and the use of trade secrets precludes either copyright or patent because these both require the revelation of the information being protected, and both have statutes of limitations which preclude their long term viability. It has been successfully argued that a widely distributed trade secret is no longer a secret, and is therefore no longer protected. There is a further requirement in the case of a trade secret that a contract be agreed upon by all parties, and the signing of a complex contract significantly reduces the likelihood and increases the price of a sale.

So called 'shrink wrap' laws have been enacted in some states to allow the opening of a sealed package to constitute agreement to a contract, but the constitutionality of these laws are yet to be tested, many states have no such laws, and in most cases the contracts used in shrink wrapped products do not provide sufficient rights to the purchaser to constitute a fair exchange, and therefore would not likely be held to be valid contracts even if signed by both parties. Most products sold as trade secrets explicitly exclude an implied warranty of sale and refuse any responsibility for consequential damages, both of which are highly questionable practices that have not yet been subject to detailed examination by the courts. In the case of a copyright, the purchaser is buying a product in a similar sense to the purchase of a book, whereas in the case of a purchase requiring a trade secret agreement, the purchaser is presumably entitled to a great deal more protection. Another problem with shrink wrap licenses is that it is hard to prove that the buyer read the agreement and therefore knowingly agreed to its terms.