• Part Number:
  • Part Number Title:
    Marine Terminals
  • Subpart:
    1917 Subpart B
  • Subpart Title:
    Marine Terminal Operations
  • Standard Number:
  • Title:
    Definition of "Trade Secret" (Mandatory)
  • GPO Source:

The following is a reprint of the "Restatement of Torts" section 757, comment b (1939):

 b. "Definition of trade secret." A trade secret may consist of any
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. It may be a formula for a
chemical compound, a process of manufacturing, treating or preserving
materials, a pattern for a machine or other device, or a list of
customers. It differs from other secret information in a business (see
s759 of the Restatement of Torts which is not included in this Appendix)
in that it is not simply information as to single or ephemeral events in
the conduct of the business, as, for example, the amount or other terms of
a secret bid for a contract or the salary of certain employees, or the
security investments made or contemplated, or the date fixed for the
announcement of a new policy or for bringing out a new model or the like.
A trade secret is a process or device for continuous use in the operations
of the business. Generally it relates to the production of goods, as, for
example, a machine or formula for the production of an article. It may,
however, relate to the sale of goods or to other operations in the
business, such as a code for determining discounts, rebates or other
concessions in a price list or catalogue, or a list of specialized
customers, or a method of bookkeeping or other office management.
 "Secrecy." The subject matter of a trade secret must be secret. Matters
of public knowledge or of general knowledge in an industry cannot be
appropriated by one as his secret. Matters which are completely disclosed
by the goods which one markets cannot be his secret. Substantially, a
trade secret is known only in the particular business in which it is used.
It is not requisite that only the proprietor of the business know it. He
may, without losing his protection, communicate it to employees involved
in its use. He may likewise communicate it to others pledged to secrecy.
Others may also know of it independently, as, for example, when they have
discovered the process or formula by independent invention and are keeping
it secret. Nevertheless, a substantial element of secrecy must exist, so
that, except by the use of improper means, there would be difficulty in
acquiring the information. An exact definition of a trade secret is not
possible. Some factors to be considered in determining whether given
information is one's trade secret are: (1) The extent to which the
information is known outside of his business; (2) the extent to which it
is known by employees and others involved in his business; (3) the extent
of measures taken by him to guard the secrecy of the information; (4) the
value of the information to him and his competitors; (5) the amount of
effort or money expended by him in developing the information; (6) the
ease or difficulty with which the information could be properly acquired
or duplicated by others.
 "Novelty and prior art." A trade secret may be a device or process which
is patentable; but it need not be that. It may be a device or process
which is clearly anticipated in the prior art or one which is merely a
mechanical improvement that a good mechanic can make. Novelty and
invention are not requisite for a trade secret as they are for
patentability. These requirements are essential to patentability because a
patent protects against unlicensed use of the patented device or process
even by one who discovers it properly through independent research. The
patent monopoly is a reward to the inventor. But such is not the case with
a trade secret. Its protection is not based on a policy of rewarding or
otherwise encouraging the development of secret processes or devices. The
protection is merely against breach of faith and reprehensible means of
learning another's secret. For this limited protection it is not
appropriate to require also the kind of novelty and invention which is a
requisite of patentability. The nature of the secret is, however, an
important factor in determining the kind of relief that is appropriate
against one who is subject to liability under the rule stated in this
Section. Thus, if the secret consists of a device or process which is a
novel invention, one who acquires the secret wrongfully is ordinarily
enjoined from further use of it and is required to account for the profits
derived from his past use. If, on the other hand, the secret consists of
mechanical improvements that a good mechanic can make without resort to
the secret, the wrongdoer's liability may be limited to damages, and an
injunction against future use of the improvements made with the aid of the
secret may be inappropriate.