Economic Value Test

Definition

The Economic Value Test is a key component in determining whether information qualifies as a trade secret under the law. It assesses the economic value that the information holds for the owner, and whether that value is derived from the information not being publicly known.

5 Must Know Facts For Your Next Test

1. The Economic Value Test is one of the three key elements required to establish that information constitutes a legally protectable trade secret.
2. The test examines whether the information at issue derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use.
3. The value of the information must be more than just trivial; it must provide a demonstrable competitive advantage to the owner.
4. The owner's efforts to maintain the secrecy of the information are also considered under this test, as the value is derived from the information not being publicly known.
5. Courts will weigh factors such as the owner's investment in developing the information, the difficulty and cost of independently developing the same information, and the commercial advantage the information provides over competitors.

Review Questions

• Explain how the Economic Value Test relates to the definition of a trade secret.
  • The Economic Value Test is a crucial component of the legal definition of a trade secret. For information to qualify as a trade secret, it must derive independent economic value, actual or potential, from not being generally known and not being readily ascertainable by proper means. The test examines whether the owner of the information derives a demonstrable competitive advantage from the secrecy of the information, which is a key requirement for establishing trade secret protection.
• Describe the factors courts consider when evaluating the economic value of the information under the Economic Value Test.
  • Courts will examine a variety of factors when assessing the economic value of the information under the Economic Value Test. These factors include the owner's investment in developing the information, the difficulty and cost of independently developing the same information, the commercial advantage the information provides over competitors, the owner's efforts to maintain the secrecy of the information, and the potential harm that could result from the information being disclosed or used by others. The information must provide more than just trivial value and must confer a demonstrable competitive advantage to the owner.
• Analyze how the Economic Value Test and the Reasonable Efforts to Maintain Secrecy element work together to establish trade secret protection.
  • The Economic Value Test and the Reasonable Efforts to Maintain Secrecy element are closely intertwined in the context of trade secret law. The economic value of the information is directly tied to the owner's efforts to keep it confidential. If the information is not subject to reasonable efforts to maintain its secrecy, then it cannot be said to derive independent economic value from not being publicly known. Conversely, the owner's efforts to maintain secrecy are a key factor in demonstrating the economic value of the information, as the value is derived from the information not being readily available to competitors. The two elements work together to establish that the information at issue qualifies as a legally protectable trade secret.

Related terms

Trade Secret:

A trade secret is a type of intellectual property that consists of information, a formula, pattern, compilation, program, device, method, technique or process that derives independent economic value from not being generally known and is subject to reasonable efforts to maintain its secrecy.

Reasonable Efforts to Maintain Secrecy: The owner of a trade secret must demonstrate that they have taken reasonable steps to keep the information confidential, such as using non-disclosure agreements, limiting access, and implementing physical and digital security measures.

Competitive Advantage:

Information qualifies as a trade secret if it provides the owner with a competitive advantage in the marketplace by virtue of not being publicly known.