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Intellectual Property

An introduction to intellectual property, such as patents, copyright, and trademarks

Trade Secrets

Trade Secret is information a firm reserves for its exclusive use, or for use by other firms to which it grants a license, such as the recipe for Coca-Cola. Trade secrets share some similarities with patents, but they differ in one meaningful way. Patents are only granted for a set length of time (currently 17 years), while trade secrets can be kept indefinitely. Trade secrets are also governed by state laws, unlike patents which are issued by the federal government, and must meet much less strict guidelines than patents, which require strict standards of novelty and unobviousness, and must represent a genuine advance in a particular field. A trade secret qualifies as a trade secret as long as the information has some degree of novelty, cannot be readily discovered by public introspection, and most importantly, is actively protected from disclosure by the firm.  Finally, trade secrets are not legally protected in the same way as patents.  A trade secret cannot be used if it is acquired by improper means (espionage, a former employer leaking the secret), but if another firm independently discovers the secret, they can freely use the information without having to pay a licensing fee, and cannot be legally prevented from using it. (Frederick, R.E. "Trade Secrets" Encyclopedia of Business Ethics, Blackwell, 1997.)