What is a trade secret?

Trade secrets can be a company’s most valuable IP asset, differentiating it from its competitors. Take, for example, a famous soft drink company: the recipe of its soft drink product is a very closely guarded secret, so only those who know how to make it can. This recipe and method is not written down as it could be exposed or more easily passed on. Instead, it stays in the minds of its creators/workers and is then passed through the business hierarchy, staying with senior members of the company.

Broadly, the term “trade secrets” deals largely with confidentially, or closely held information which can take the form of unpatented inventions, formulae or designs. In other words, it is something a business would not want a member of staff “putting on a USB stick and approaching a competitor with”. Assets which can be considered trade secrets may include know-how databases, recipes, technical designs, software code or even pricing matrices, and must be protected via the implementation of a trade secrets policy.

What is the difference between patent and trade secrets?

Unlike patents, trade secrets are protected without registration; that is, trade secrets are protected without any procedural formalities. As a result, a trade secret can be protected for an unspecified period of time, thus proving more advantageous than patents, which have a protection limit of 20 years. This can be a particularly beneficial solution where a technological product cannot be easily reverse-engineered or, in fact, where a trade secret does not qualify for formal registrable protection.

There are, however, a handful of conditions for the information to be considered a trade secret, and compliance with such conditions may turn out to be more difficult and costly than would appear at first glance. While these conditions vary from country to country, some general standards exist which are referred to in Art. 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement):

  • It must have commercial value because it is a secret

How do trade secrets apply to me?

Your company may have certain forms of know-how or organisational knowledge which are critical to its competitive advantage, but which retain value only as long as they remain a secret. These can take a variety of forms, including a critical database, algorithm or software, a technical attribute of a piece of equipment, a unique process, a recipe or secret ingredient in a product or other forms of registrable IP which may be ill-suited to protecting a company’s key IP assets.

It is crucial to recognise that just merely having the policy, protocols and password protections, etc. in place may not be sufficient, as an effective trade secrets policy needs to be recognised by all staff and embedded within the IP culture of a business. Metis Partners can help you identify which of your company’s IP assets qualify as a trade secret, create a robust trade secrets policy to properly manage and protect these key IP assets and instill a culture of trade secret protection within your company.