Trade Secret

AAA

DEFINITION of 'Trade Secret'

Any practice or process of a company that is generally not known outside of the company. Information considered a trade secret gives the company an economic advantage over its competitors, and is often associated with internal research and development. In order to be legally considered a trade secret in the United States, a company must take a reasonable effort in concealing the information from the public, the secret must intrinsically have economic value and the trade secret must contain information.

BREAKING DOWN 'Trade Secret'

Trade secrets are the "classified documents" of the business world, just as top secret documents are closely guarded by government agencies. Because of the cost in developing certain products and processes is much more expensive than competitive intelligence, companies have an incentive to figure out what makes their competitors successful. To protect its trade secrets, a company may require employees privy to the information to sign non-compete or non-disclosure agreements upon hire.

RELATED TERMS
  1. Chief Technology Officer - CTO

    An executive who is responsible for the management of an organization's ...
  2. Industrial Espionage

    The theft of trade secrets by the removal, copying or recording ...
  3. Non-Competition Agreement

    A legal agreement in which one party is restricted from working ...
  4. Intellectual Property

    A broad categorical description for the set of intangibles owned ...
  5. Research And Development - R&D

    Investigative activities that a business chooses to conduct with ...
  6. Proprietary Technology

    A process, tool, system or similar item that is the property ...
Related Articles
  1. Investing Basics

    Patents Are Assets, So Learn How To Value Them

    Innovation is the key to staying on top. Find out how companies protect their ideas and how to figure out how much they're worth.
  2. Options & Futures

    Handcuffs And Smoking Guns: The Criminal Elements Of Wall Street

    From godfathers to perps, familiarize yourself with the "criminal elements" creeping around Wall Street.
  3. Fundamental Analysis

    Evaluating Pharmaceutical Companies

    Learn how to find a healthy pharmaceutical investment in a market full of weak drugs.
  4. Investing

    R&D Spending And Profitability: What's The Link?

    Return on research capital (RORC), can help investors measure how much profit R&D spending actually generates.
  5. Active Trading

    Which Is Better: Dominance Or Innovation?

    Find out how to assess and evaluate both these values in the market and your portfolio.
  6. Term

    What is a Preemptive Right?

    A preemptive right allows select shareholders to buy newly issued shares in their corporation before the general public.
  7. Economics

    Explaining the Balanced Scorecard

    A balanced scorecard is a metric that measures a business’ performance.
  8. Investing News

    Employee Or Contractor? An On-Demand Economy Problem

    Several on-demand economy startups classify, or classified, their workers as contractors rather than employees. It is an unconventional approach to hiring and has been a hit with venture capitalists ...
  9. Investing Basics

    What is a Public Company?

    A public company has sold stock to the public through an initial public offering (IPO) and that stock is currently traded on a public stock exchange.
  10. Investing

    3 Ways to Monetize Your Expertise

    Anyone can make money from sharing their knowledge with others.
RELATED FAQS
  1. What challenges face infant industries?

    Infant industries are nascent industries in an economy, which many argue require protection and nurturing during their early ... Read Full Answer >>
  2. What are the risks of using CI (competitive intelligence) for espionage?

    The line between competitive intelligence, or CI, and illegal corporate espionage is not always clear. This is especially ... Read Full Answer >>
  3. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  4. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  5. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  6. What should a whistleblower do if their employer retaliates?

    Although specifically prohibited by employment law, employer retaliation against whistleblowers for exposing employers' wrongdoings ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!