South Carolina NASCLA Business Law and Management Practice Exam

Trade secrets refer to confidential business information that is not generally known to the public and provides a competitive edge to a business. This type of information can include formulas, practices, processes, designs, instruments, or a compilation of information that is valuable because it is not known to others and gives the business an opportunity to obtain an economic advantage over competitors who do not have access to this information.

The key feature of trade secrets is their confidentiality. By keeping this information secret, businesses can maintain their competitive advantage in the marketplace. Unlike patents, which require public disclosure, trade secrets remain protected as long as their confidentiality is maintained.

In contrast, the other options do not capture the essence of what trade secrets are. Information shared openly with the public would not qualify as a trade secret since it lacks the necessary confidentiality. Common knowledge that is generally known and used by all businesses in a sector cannot be classified as a trade secret because it does not confer a competitive advantage. Lastly, contracts made verbally pertain to agreements rather than confidential information; thus, they do not relate to trade secrets in the context of business advantage.