A trade secret is a form of intellectual property that is protected by state and, in some cases, federal law. What constitutes a trade secret is defined by the law that protects it and, as such, a number of different types of property can be a trade secret.

The term “trade secret” has generally been defined as information (such as a formula, pattern, compilation, program, device, method, technique, or process), that has economic value, and is kept secret by efforts that are reasonable under the circumstances. The trade secret will usually have economic value because it is not generally known or readily ascertainable.

Unlike the requirements for obtaining patent protection, there is generally no novelty requirement for trade secrets. Therefore, if someone else independently figures out the same knowledge, then there is no claim under trade secret law. This often comes up in the context of reverse engineering. Reverse engineering a project that was sold does not violate trade secret law because selling a product does not keep it reasonably secret (However, under contract law, reverse-engineering that violates an explicit contractual provision may be actionable).

Trade secret law protects ideas that do not meet the concreteness requirement of unfair competition or misappropriation law. Trade secret law is based on the tort law theory that regulates bad or unreasonable conduct or on the contract law theory of non-disclosure. The question leads to differences in remedy and statutes of limitation. As a policy matter, the courts fear that stealing trade secrets discourages research and innovation.

Trade secret claims often arise in the context of a competitor taking efforts to obtain confidential information. In this context, one must generally have knowledge that the trade secret was illegally appropriated to be held liable. The act to acquire the trade secret does not have to be illegal for liability to attach.

Trade secret claims can also arise when current or former employees abscond with or use information for their own benefit or for the benefit of others. The courts have the power to prevent an employee from working for another employee if an inevitable disclosure must be made for the employee to work for the employer. This type of claim pits the property rights created under trade secret laws and free speech laws. With respect to non-copyrighted inventions created by the employee, the employee can generally take the trade secret with them to their new employer because, absent an express agreement to the contrary, the property belongs to the employee inventor.

There are a number of state and federal laws that can apply in trade secret cases. For example, the Economic Espionage Act imposes criminal and civil penalties for those who engage in cross border industrial espionage.