Public Employees' Chemical Right To Know Act Page 30
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31APPENDIX E TO SAFETY CODE NO. 12
DEFINITION OF "TRADE SECRET" (MANDATORY)
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 ' 759 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 requisite of patentability. The nature of the
secret is, however, an important factor in determining the kind of relief that is appropriate
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