0

I know a trade secret must be kept secret. It can be shared with a third party if the third party signs a legally binding NDA (non-disclosure agreement) before being told about the trade secret.

What happens if X was supposed to sign an NDA, but didn't sign it for whatever reason, and was shown a trade secret without the NDA? Does the trade secret cease to be a trade secret because it was not kept secret, or is this only the case if X gives the trade secret away? If the "trade secret" status was lost, can this be fixed by making X sign an NDA after the fact?

2

It can be shared with a third party if the third party signs a legally binding NDA (non-disclosure agreement) before being told about the trade secret.

Why do you think that? If I share confidential information (including trade secrets) with you in circumstances of confidentiality and you disclose it to a third party, I can sue for the tort of breach of confidence you irrespective of if you and I have an NDA and irrespective if you and the third party have signed an NDA. If we have an NDA, I can also sue you for breach of contract (which is generally easier that proving the tort). By the way, employment contracts have an implicit term of confidentiality in them even in the absence of an explicit NDA.

To prove the tort the plaintiff must show:

  1. The information is secret or confidential - it must not be public and it must be identified with precision (i.e. "everything I tell you ever is confidential" is not precise),
  2. The information must be transmitted in circumstances where the defendant knew or should have known that it was confidential,
  3. There must be unauthorised use of the information to the detriment of the plaintiff. Among the defences that can be raised are the public interest and general inequity
1

The terms "trade secret" is defined federally in 18 USC 1839(3) as

all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—

(A) the owner thereof has taken reasonable measures to keep such information secret; and

(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information;

There is no requirement that there be an NDA, much less a signature, in order for information to be a trade secret. Misappropriation, which is against the law, requires the doer to know or have reason to know that there is no consent to disclosure, and an NDA plus a signature helps establish that knowledge.

Under the Uniform Trade Secrets Act, Section 1 (4):

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

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

and again neither an NDA nor a signature are necessary for something to be a trade secret.

  • You misunderstood: If you give the information yourself to a third party, without the third party signing an NDA, then you haven't made reasonable efforts to maintain its secrecy. – gnasher729 Aug 31 '16 at 0:18
  • 1
    If that has been established with case law, okay, but universally succeeding in getting signatures on NDAs is not a statutory requirement of "reasonable effort". If it slips between the cracks, that does not prove that there were no reasonable efforts. Do you have a case in mind that suggests otherwise? – user6726 Aug 31 '16 at 0:48

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.