The term "derivative" trade secrets[i] is the basis of a new legal theory being shopped around to create broad trade secret liability where none exists. Under this theory, someone who buys a product made with a trade secret process, without knowledge of the trade secret or intent to misappropriate it, can nonetheless be liable for misappropriation because the product was "derived from" an unauthorized use of a trade secret.


Moreover, neither the Uniform Trade Secrets Act nor the Defend Trade Secrets Act create this kind of "derivative" liability. Something is either a trade secret or it is not. To be a trade secret, two essential elements are required (among others).

  1. The trade secret must be secret; and

To qualify as a protectable trade secret, the owner of the trade secret must make "efforts that are reasonable under the circumstances to maintain its secrecy."[vii] Trade secret law "does not offer protection against discovery by fair and honest means, such as by independent invention, accidental disclosure, or by so-called reverse engineering. . . ." [viii] So if the product itself embodies the trade secret, if it is not sold under an NDA with a "no reverse engineering clause", then any secrecy ended upon sale. Further, if the product is well-known, and does not reveal any trade secrets, then the product is not a trade secret. Moreover, trade secret misappropriation requires intent and cannot be a strict liability offense.


So is this a creative way for "trolls" to hit up buyers for settlements? Perhaps like the copyright troll who asks for money if a picture is inadvertently copied from one website to another without permission? Or even a patent troll? Regardless of what you call it, "derivative trade secret" is a theory that quickly disappears in the light of day.


[i] Benjamin J. Bradford and Remi Jaffré, The Uncertain Protection of "Derivative" Trade Secrets, 18 J. MARSHALL REV. INTELL. PROP. L. 241 (2019).

[ii] Bradford, supra note 1 at 242-243.

[iii] Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 152 (1989) ("state regulation of intellectual property must yield to the extent that it clashes with the balance struck by Congress in our patent laws.").

[iv] 35 U.S.C.A. § 271 (West). ("Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent.")

[v] 19 U.S.C.A. § 1337 (West).

[vi] Unif. Trade Secrets Act .§ 1 (1985).

[vii] Id.

[viii] See, e.g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476, (1974).
