Trade Secret

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. Non-Compete Agreement

    An agreement between two parties, typically an employee and employer, ...
  2. Confidential Treatment Application

    A form filled out in accordance with a company's 8-K, 10-Q, ...
  3. Confidential Treatment Order - ...

    An order that provides confidential treatment for certain documents ...
  4. Material Insider Information

    Material information, about certain aspects of a company, that ...
  5. Industrial Espionage

    The theft of trade secrets by the removal, copying or recording ...
  6. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it ...
Related Articles
  1. Investing News

    Victoria's Secret Gets Two New Executives (LB)

    Victoria's Secret hires two new executives to head the company through its streamlining plans.
  2. Economics

    How NDAs Work and Why They're Important

    A non-disclosure agreement, or NDA, is a legal document that keeps the lid on sensitive information.
  3. Stock Analysis

    Victoria's Secret Moving Away From Famous Catalog

    Say it isn't so! Amid a restructuring of its business, L Brands (NYSE: LB) announced that its Victoria's Secret division will be moving away from its iconic lingerie catalog in favor of using ...
  4. Investing Basics

    Five Successful Investing Strategies

    The secret to investing is that there is no secret. Success is all about knowing yourself, getting the basics and using both to make the right choices.
  5. Investing

    3 Secrets Of Successful Companies

    Make smart investments by spotting up-and-coming success stories early.
  6. Savings

    3 Secrets You Didn’t Know About Estate Planning

    When it’s time to provide for your heirs, you need to protect your assets. Knowing these three secrets can keep your estate planning on the right path.
  7. Investing Basics

    What Is The Impact Of Research On Stock Prices?

    The answer to this question is directly related to the importance of information in the marketplace.
  8. Investing

    Asset Manager Ethics: Acting With Competence and Diligence

    Managers must make investment decisions based on their personal investment process, which in turn should be based on solid research and due diligence.
  9. Retirement

    5 Secrets You Didn’t Know About Roth IRAs

    Being financially savvy requires knowing a few secrets about Roth IRAs, which, for some, are very attractive retirement instruments.
  10. Active Trading

    Data Mining For Investors

    Being an informed investor is extremely important, but where and how do you get the data for your research?
RELATED FAQS
  1. What does a company use CI (competitive intelligence) for?

    Take a brief overview of the art of competitive intelligence, or CI, and how companies compete with one another for information ... Read Answer >>
  2. How do I determine my company's competitive advantage?

    Find out how to determine if your company has a competitive advantage and, if so, learn how to figure out how to make it ... Read Answer >>
  3. What is the difference between CI (competitive intelligence) and competitive analysis?

    Understand the difference between competitive intelligence and competitive analysis. Learn why a company conducts both types ... Read Answer >>
  4. Is a private company required to disclose financial information to the public?

    Understand whether a private company is required to disclose financial information to the public. Learn what is required ... Read Answer >>
  5. What are the GAAP standards for digital document storage?

    According to Sarbanes Oxley Act (SOX), companies are required to keep all documents that contain information about a company's ... Read Answer >>
  6. What is the difference between research and development and product development?

    Understand the difference between research and development and product development. Learn why a company would want to invest ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center