Use the following pacts for the next two questions:

Pym Particles develops a proprietary software algorithm that significantly enhances data encryption. To protect this trade secret, the company implements several security measures. During a legal dispute, the court must determine whether Pym Particles took reasonable steps to maintain the secrecy of its algorithm.

Which of the following scenarios best illustrates reasonable steps taken by Pym Particles Inc. to protect its trade secret?

Question

Use the following pacts for the next two questions:

Pym Particles develops a proprietary software algorithm that significantly enhances data encryption. To protect this trade secret, the company implements several security measures. During a legal dispute, the court must determine whether Pym Particles took reasonable steps to maintain the secrecy of its algorithm.

Which of the following scenarios best illustrates reasonable steps taken by Pym Particles Inc. to protect its trade secret?

BlackTom AI · Accepted Answer

In this question, we evaluate which scenario best demonstrates reasonable steps to protect a trade secret.
Option 1: The company shares the algorithm with external partners without any confidentiality agreements in place.
This is not a reasonable protective step. Without confidentiality agreements, the external partners have no legal obligation to keep the trade secret confidential, increasing the risk of misappropriation.
Option 2: The company labels the algorithm files as "CONFIDENTIAL" and restricts access to employees on a need-to-know basis.
This aligns with typical trade secret protections: formal labeling and access control limit who can view the secret, reducing the chance of leakage and showing deliberate steps to maintain secrecy.
Option 3: The company stores the algorithm on a publicly accessible server but requires employees to sign non-disclosure agreements.
Publicly accessible storage undermines secrecy regardless of NDAs; even with NDAs, the public availability creates a breach of secrecy, making this an unreasonable protection.
Option 4: The company does not label the algorithm files but uses advanced encryption to protect them.
Encryption helps protect data in transit or at rest, but without labeling or access restrictions, the underlying secrecy is not adequately maintained. Encryption alone does not establish reasonable steps to maintain the trade secret’s secrecy if unauthorized individuals can still access or view the files.

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