Trade secrets are a form of intellectual property that the law protects from unauthorized use or disclosure, under certain conditions.
Trade secrets can be protected by both state and federal law. These laws vary, but all define trade secrets as information that:
Like trademarks (and unlike patents and copyrights) trade secret protection can theoretically last “forever.” One of the oldest trade secrets, and probably the most famous, is the recipe for Coca-Cola, which has been closely guarded since the 1880s.
Other examples of important trade secrets are the Google search algorithm, the recipe for Kentucky Fried Chicken, and the formula for WD-40.
The recent case of Smash Franchise Partners, LLC v. Kanda Holdings, Inc. involved competing entrepreneurs in the business of mobile trash compacting.
The defendant, Todd Perri, was initially interested in obtaining franchise rights from Smash Franchise Partners, LLC, and Smash My Trash, LLC (jointly, "Smash"). But Perri decided that he could create a similar business without working with Smash.
Perri participated in Zoom videoconference calls with Smash and with existing franchisees, in order to learn more about the business.
As the court noted,
“Zoom has features that a host can use to control who participates in a meeting, such as requiring a password for access and placing participants into a waiting room so that the host can admit them individually after verifying their identity.”
The court stated that it wasn’t clear whether Smash had disclosed any information on the calls that constituted a trade secret.
“Assuming for the sake of analysis that Smash had protectable trade secrets, Smash did not take reasonable steps to protect their secrecy. Smash freely gave out the Zoom information for the Franchisee Forum Calls and the Founder Calls to anyone who had expressed interest in a franchise and completed the introductory call. Smash used the same Zoom meeting code for all of its meetings. Smash did not require participants to enter a password and did not use the waiting room feature to screen participants. Anyone who had expressed interest and received the code could join the calls, and participants could readily share the code with others.”
Just as trade secrets can be protected “forever,” they can be lost in an instant if handled carelessly.