How trade secrets can bring value to your business
Hush – hush! – It is a trade secret.
Business in the modern world has become cutthroat and to remain competitive and to meet the ever evolving customer demands, businesses are being forced to innovate and improve their product offerings and services. The said innovation is driven by information which if it lands in the wrong hands, will result in a business losing its competitive edge. Such important information is what is referred to as a trade secret and it must always be kept hush – hush!
Trade secrets, if maintained, can have immense value to a business. A classic example of a well-managed trade secret is the Coca – Cola recipe. To prevent the erosion or loss of its competitive edge provided by such information, a successful company must safeguard its proprietary information. This article will highlight what a constitutes a trade secret at law and why a business must protect its trade secrets.
What is a trade secret?
A trade secret is any confidential business information which is not generally known to the relevant business circles or to the public which provides a business a competitive edge or economic benefit. The competitive edge or benefit must derive specifically from the fact that it is not generally known, and not just from the value of the information itself. Further, the information must be subject to reasonable efforts being taken by the rightful holder of the same to maintain its secrecy. A trade secret is valuable and continues for as long as the information is maintained as a secret.
Examples of trade secrets
Any information which is valuable to a business can qualify to be a trade secret. A trade secret can relate to marketing, export or sales strategies, or a method of bookkeeping or other business management routines or procedures, including software used for various business purposes.
Other examples of potential trade secrets may include business plans, business processes, key customers data, know – how, list of reliable or special suppliers, product specifications, product characteristics, purchase prices of key raw materials, test data, technical drawing or sketches, engineering specifications, proprietary recipes, formulas, content of laboratory note books, salary structure of a company, product pricing and advertising rates, source code, object code, databases and electronic data compilations, agreements containing details of marketing tie‐ups, promotional or marketing material under development.
Why trade secrets must be protected
If a trade secret is not protected, competitors can use the innovations to their advantage and thus diminish a businesses’ competitive edge without having to shoulder the burden of costs or risks faced in developing the innovations.
Trade secret protection is cost effective as there are no registration costs involved as is the case with patents and trademarks. Patent protection requires disclosure to the public. However, trade secret protection does not require disclosure. Other forms of IP protection such as patents are limited in time, whereas a trade secret is not.
In the case of violation of a trade secret, the law requires the owner of the trade secret to show that the information in question was indeed a secret and that all reasonable steps were taken to maintain the information as a secret. It is therefore critical that the owner of a trade secret must put in place measures to protect and maintain the confidential information as a secret.
We recommend that business owners must put in place a trade secret management programme. Such a programme must include trade secret audits, educating staff members on the importance of IP, reviewing, and drafting agreements, including employment and independent contractor contracts to protect the confidential information. Assistance should be sought from IP and Technology professionals on the development of the said programme.
Please contact our IP & Technology Team for assistance.