The Challenges in Keeping a Trade Secret

Secrets — Deciding to keep a key corporate asset as a trade secret is not the end but rather the beginning of an interesting journey. Companies must also understand that there will be a number of bumps along the road, too.

Trade secrets and know-how can be some of the most valuable assets in the intellectual property portfolio of an organization. They are at least on a par with other forms of intellectual property such as patents and trademarks. Some would argue that trade secrets and know-how are the crown jewels of any intellectual property portfolio.

However, they are fragile and only are of value if kept secret.

Why Keep Secrets?

There are number of intangible assets within companies which must be kept secret in order for the company to remain competitive.

A trade secret is a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information which is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors or customers. The scope of trade secrets is virtually unlimited. A trade secret continues for as long as the information is maintained as a secret.

Know-how as defined by EU Commission Regulations comprises a package of non-patented practical information, resulting from experience and testing, which is substantial (that is to say, significant and useful for the production of the contract products) and identified (that is to say, described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of substantiality). Know-how must also be secret (that is to say, not generally known or easily accessible).

Of course restricted company confidential information and general company confidential information may also be added to this list.

Keeping Secrets – Easier Said Than Done

Deciding to keep such assets secret is however easier said than done. It may seem like a very good idea and there may be common agreement to keep such assets secret, but it is often extremely difficult to do so in practice.

Here are a few reasons why.

Human Nature

Some people just find it difficult to keep a secret.

One sometimes hears people say, “I’ve been sitting on a really awesome secret the past couple of days, and I have to say, it’s killing me that I can’t tell anyone.”

Keeping something secret requires both self-control and the ability to make choices, but withholding information creates stress for some people and can leave them feeling alone and alienated from those that don’t know. This can evoke a lot of anxiety which makes it more difficult to think clearly, and for people who find it hard to manage those feelings or who are very anxious, keeping a secret can be almost impossible.

Openness

Openness is an overarching concept or philosophy that is characterized by an emphasis on transparency and free, unrestricted access to knowledge and information, as well as collaborative or cooperative management and decision-making rather than a central authority. Openness can be said to be the opposite of secrecy.

Many companies are embracing this spirit of openness.

Traditionally, internal innovation was the paradigm under which most firms operated, with most innovative companies keeping their discoveries highly secret and no attempt made to assimilate information from outside their own research and development laboratories.  This was driven by the belief that: “the smart people in our field work for us”.  However, in recent years the world has seen major advances in technology and society which have facilitated the diffusion of information.

Companies have also begun to realize that “not all the smart people work for us and that we need to work with smart people inside and outside our company”. Such collaboration can take many forms, from working with universities, cooperating closely with key suppliers and vendors, collaborating with application developers, content providers, technology house and design houses, plus working with various communities including ‘open’ communities, innovation networks, standardization bodies as well as customers and end-users.  It can also involve working with start-ups and venture capital funded entities, as some of the smallest companies can achieve great things with limited funding.

Digitization

The business world is going digital. This of course means different things to different companies. Fundamentally, digitization means converting data from analog formats into digital formats, but it means much more than this.

Companies are moving to paperless environments converting their papers and files into digital formats. Key business applications are being computerized. Companies are taking their manual or offline activities or processes and converting them to online, networked, computer-supported processes. Regardless of what digitization means to a particular company, it generally promotes easy discovery, access, and use of information.

Organizational Loyalty

Organizational loyalty is a general term and denotes a person’s commitment and attachment to the place they work.

Long gone are the days when an employee joined a company after leaving school and stayed with that company until retiring. These days, people expect to move around across numerous companies over their working career.

The generation of young Millennials now in the work place clearly have a different set of expectations compared to older generations about their careers. In a nomadic world, one of the casualties is a decreasing sense of loyalty to a particular organization. If loyalty is defined as being faithful to a company, then there seems to be a certain amount of disloyalty in the workplace these days.

The recent global recession has also had an adverse impact on such loyalty as loyalty is a two way street.

Cyber Crime

Cyber attacks are crimes in which the computer system of the company is the target. Cyber attacks consist of computer viruses (including worms and Trojan horses), denial of service attacks, and electronic vandalism or sabotage. Cyber theft comprises crimes in which a computer is used to steal money or other things of value. Cyber theft includes embezzlement, fraud, theft of intellectual property, and theft of personal or financial data. Other computer security incidents encompass spyware, adware, hacking, phishing, spoofing, pinging, port scanning, and theft of other information, regardless of whether the breach was successful.

This is a growing problem for all companies. Cybercrime is one of the greatest threats facing any company, and has enormous implications for its security, prosperity, and safety. The range of threats and the challenges they present for companies is expanding just as rapidly as technology evolves.

No Process in Place to Manage Trade Secrets

Many companies lack a robust fit for purpose process to manage their trade secrets.

A process is an interrelated set of activities designed to transform inputs into outputs, which should accomplish your pre-defined business objectives. Processes produce an output of value, they very often span across organisational and functional boundaries and they exist whether you choose to document them or not.

A process can be seen as an agreement to do certain things in a certain way and the larger your organisation, the greater the need for agreements on ways of working. Processes are the memory of your organisation, and without them a lot of effort can be wasted by starting every procedure and process from scratch each time and possibly repeating the same mistakes.

The Hazel Trade Secret Asset Management System may help your company manage its trade secrets and trade secret processes. Contact the Hazel Team today.

For Secrets — I’m Donal O’Connell.

Credits:

By Unknown or not provided (U.S. National Archives and Records Administration) [Public domain], via Wikimedia Commons