When it comes to protecting intellectual property, patents certainly get all the press. Depending on the circumstances, there are instances where patent protection may not be the best option—namely instances where the publication of the very details of the innovative concept, as required for a patent, would be ruinous to the company. For the technology firm, there are other options for protecting valuable innovations, one of which is the primary focus of this article—trade secrets.
Trade secrets, generally speaking, may be virtually any kind of data, information, process or know-how that is not known or easily ascertained. In other words, a trade secret is…a secret. There are essentially two requirements for claiming that you have a trade secret:
- The trade secret must have economic value
- The secret must be kept “secret.”
With regard to the first element, while your mother’s recipe for chocolate chip cookies might be spectacular, there is likely no real economic value associated with the recipe. On the other hand, think of the formula for Coca-Cola: It is certainly secret, and one cannot credibly argue against the economic value of that secret.
With regard to the second element, keeping your information secret, it is important to note that there is no singular method or process that is considered effective for maintaining secrecy. Rather, a number of techniques may be employed, for example:
- Legal documents: requiring persons exposed to the trade secret information to sign confidentiality or non-disclosure agreements with clear and effective penalties for breach
- Compartmentalizing information: not allowing one person to have knowledge of the entire trade secret (i.e. two employees each only have access to one-half of the formula, process, code, etc.)
- Education: informing your employees about the value of trade secrets, and the importance of maintaining their protection
- Physical and digital security: using all appropriate measures of security (i.e. locks, firewalls, scanners, permissions, badging, etc.) to prevent unauthorized access to the trade secret.
- Enforcement campaigns: It is imperative to take immediate action against all responsible parties upon receiving knowledge that your trade secret may have been leaked.
The list above is not exhaustive, but it is a sample of some of the most obvious measures required in order to maintain a trade secret.
Taking all of the above into account, the question arises—why trade secrets? The primary answer is that if you can properly maintain your trade secret it can last a lifetime. A patent provides you with complete exclusivity over your process or formula, but only for a defined period of time. Think, for example, if the Coca-Cola Co. had patented its original formula in 1886, that most famous trade secret would have been available to the public for a century now. By keeping it secret, however, the Coca Cola Company has maintained its exclusivity over that most famous beverage for more than 125 years. While Coca Cola’s formula may be the most famous trade secret in the world, one can discern from using it as an example which other information or processes might be best kept secret rather than disclosed in a set of patent claims: chemical formulas and processes, software code, operational or logistical processes, and even magic tricks and their associated apparatuses.
A word of caution, however: Trade secrets are governed by state law. As such, you should consult with an attorney in the states where you conduct business in order to understand the specific requirements that the various states employ to protect and enforce trade secrets. Furthermore, 46 states have adopted the Uniform Trade Secrets Act, but Massachusetts, New York, North Carolina and Texas have not.