Trade Secrets are Valuable Assets

Companies may have valuable information that they cannot protect by patent or copyright called "trade secrets."  Such trade secrets can provide a competitive edge to succeed in the marketplace. An employee's or former employee's misuse of a trade secret can be a violation of Iowa's statutory and common law. Thus, it is important to understand what a trade secret is and how to protect it.

Iowa Code § 550.2(4) defines a trade secret as "information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process" that both "[d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use" and "[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

Courts also consider (1) the extent to which the information is known outside of one's business; (2) the extent to which it is known by employees in one's business; and (3) the extent of measures taken to guard its secrecy. Iowa Civil Jury Instructions 3400.2.

Iowa courts have found the following information to be trade secrets: a bagel manufacturer's recipes; confidential bidding information; and policyholder information, including insurance expiration dates and other valuable information. Courts may also find that a company's pricing policies, material costs, customer lists, market research, and software constitute trade secrets.

Information cannot be a trade secret, however, if it is public knowledge, generally known in an industry, or readily available by proper means. General skills or knowledge of an industry is not a trade secret. If the information can be acquired without much expense, energy, or skill, it is probably not a trade secret.

If a company believes it has a trade secret, it must take reasonable steps under the circumstances to maintain its secrecy.

If you would like more information, please contact Ray Rinkol with Bradley & Riley PC at (319) 363-0101 or rrinkol@bradleyriley.com.