Trade Secrets and Intellectual Property

Deciding when to keep a trade secret is one of the most important decisions you can make for your business's intellectual property (IP). The way you manage and protect your IP depends will be a unique decision relevant to your business, products and marketplace.

The trade secret is a powerful mechanism for protecting your IP and has advantages over filing a patent.

When filing a patent you are opting to disclose your IP to the world in a very identifiable and accessible way in exchange for a government backed guarantee of a monopoly over that IP. This means that anyone using your IP would have to either stop using it to pay you a license to continue using it, should you decide to take legal action to enforce your patent.

In some cases a patent may be your best protection, however a trade secret, should you be able to keep it effectively, can give you protection for longer with no disclosure at all.


Example of successful trade secrets

One great example of a trade secret being used to full effect is the Coca-Cola Company who has kept the details of the Coca-cola recipe secret successfully since 1888. Had the company tried to use a patent to cover the recipe those rights would have expired long ago and anyone would have been able to reproduce the Coca-Cola flavour that is at the core of their business value. With that strategy Coca-cola would not have been around today.

This is an excellent case of when to use a trade secret over patent as the soft drink in particular is impossible to reverse engineer, meaning that someone could not take Coca-Cola and determine what the recipe is, the recipe is needed to create the product.

In cases when reverse engineering of your product is possible, a patent may offer you better protection.

Protecting trade secrets

Certain laws are in place that provide protection for trade secrets. In the USA the Uniform Trade Secrets Act is in place within 45 states and provides a legal recourse for anyone who's trade secret may have been stolen and is being used in the market. This applies even if the person or company exploiting your secret does not know that this has been misappropriated.

In order to gain such protection in law you must have taken certain steps to establish and protect your trade secret.

  • You need to be able to demonstrate that your secret is non trival in the domain in which it is sold.
  • It is important to be able to document your trade secret. i.e. that the secret existed, is documented, witnessed appropriately and held securely on file will allow you prove he secret is yours and prove the timeline associated with it.
  • You must take appropriate steps to protect your secret, as you will be required to show that you have done so in any legal proceedings. For example, this may mean taking steps to use separate suppliers for different raw materials and separate manufacturing partners for different elements of the product to ensure that none has the whole picture and use of non disclosure agreements wherever possible with staff, partners and suppliers.