Trade Secret Protection
Trade secrets are by definition not disclosed to the world at large. Instead, owners of trade secrets seek to protect trade secret information from competitors by instituting special procedures for handling it, as well as technological and legal security measures. Legal protections include non-disclosure agreements (NDA) and non-compete clauses. In exchange for an opportunity to be employed by the holder of secrets, an employee may sign an agreement not to reveal his or her prospective employer's proprietary information. An employee may also surrender or assign to his employer the right to his own intellectual work produced during the course (or as a condition) of employment. Violation of the agreement generally carries the possibility of heavy financial penalties. These penalties operate as a disincentive to reveal trade secrets. Though proving a breach of a non-disclosure agreement against a former employee who is legally working for a competitor can be very difficult. A holder of a trade secret may also require similar agreements from other parties he deals with, such as vendors or licensees.
Protection of trade secret can, in principle, extend indefinitely and therefore may provide an advantage over patent protection, which lasts only for a specific period of time. Coca-Cola, for example, has no patent for its formula and has been very effective in protecting it for many more years than the twenty years of protection that a patent would have provided. In fact, Coca-Cola refused to reveal its trade secret under at least two judges' orders. The disadvantage is that there is no protection once information protected as trade secret is uncovered by others through reverse engineering, for example, whereas patent has a guaranteed time of protection in exchange for disclosing the information to the public.
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