Protecting your recipe with trade secret law

 

Secret

Alex Wellerstein, “SECRET” stamp, via Flickr Creative Commons CC 2.0

Some breweries take a wide variety of measures to ensure that their recipes do not fall into the competition’s hands.  These measures can serve as more than a tool to prevent emulation by the competition.  They can document the recipe as intellectual property, which can provide additional protections if the recipe does somehow land in the competition’s hands.  This article will describe the requirements for a recipe to be a trade secret, effective tools to meeting the requirements, and the potential benefit of holding a trade secret.

Under federal law, courts consider six factors to determine if a recipe is in fact a trade secret.  No one factor needs to be fulfilled in order to find a recipe is a trade secret, nor does the absence of any one factor prevent it from being considered a trade secret.    Instead, federal courts consider the total circumstances to uncover if the recipe is information that derives economic value from not being generally known, where reasonable efforts have been made to maintain its secrecy.  If the information is willingly disclosed to the public, the information automatically will not be considered a trade secret.  California’s trade secret laws operate in much of the same manner as the federal law, but instead are governed by the California Uniform Trade Secrets Act.

The six factors, derived from the Uniform Trade Secrets Act, are: (1) the extent to which the information is known outside the claimant’s business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the claimant to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended by the business in developing the information;  and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.  The stronger the case that can be made for each of the factors, the stronger the likelihood that the recipe is a trade secret in the eyes of the law.

Once a recipe-holder has established its recipe is in fact a trade secret, then that secret is considered intellectual property which can be protected by laws.  Most frequently and significantly, the law does this by providing remedies for it being taken without the owner’s consent.  Generally speaking, trade secret ‘misappropriation’ occurs when someone either acquires the trade secret through improper means or discloses it without the secret owner’s consent.  If a court finds that a trade secret was misappropriated, it can award monetary damages, order an injunction to stop the defendant’s use of the misappropriated trade secret, or both.

A business can take many steps prior to litigation to lay the foundation to establish that its information is a trade secret.  Again, the goal in any of these steps is to show that the business has information which gains value from being generally unknown and for which the business has made at least a reasonable effort to protect the information.  As set forth above, the six factors test above is used to determine whether a recipe qualifies for protection as a trade secret.    The business cannot control its fulfillment of most of the factors after the recipe has been created and known.  So effort should focus on guarding the secrecy of the recipe in the early stages – preventing knowledge of it even in the workplace.  Some of the measures can be done simply, utilizing practical measures like keeping the information on a need-to-know basis, making efforts to secure any recordings of the recipe, or placing others on notice that the information is a secret.  Other measures, such as non-disclosure agreements and non-compete clauses, use legal documents to contractually prevent employees, partners, and independent contractors from sharing any information the business would like to keep secret.  By making strategic decisions to protect recipes, a brewery can make sure that it has created a protectable secret, separating itself further from the competition.

It is important to note that although this article discusses the practical ways to protect a recipe through trade secret law, trade secret protection can apply to any number pieces of information that a business or individual may hold.  This can include client lists, unique processes, or any other information which can be protected and has some value in remaining secret.  If keeping your recipe out of the hands of competitors is important to you, trade secret protection can be the solution.

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Photo Credit:  Alex Wellerstein, “SECRET” stamp, via Flickr Creative Commons CC 2.0

About William Adams

Attorney at Norton, Moore, & Adams, LLP.
This entry was posted in breweries and tagged . Bookmark the permalink.

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