What is a Valuable Trade Secret?

Secrets — What is a valuable trade secret? A trade secret is a vital form of intellectual property, yet many companies are challenged when it comes to understanding and appreciating their trade secrets. These assets are likely to increase in importance going forward given the legislative changes taking place in key jurisdictions, together with some weaknesses at present with some other forms of IP such as patents.

So, what actually qualifies as a trade secret?  Better still, what qualifies as a valuable trade secret?

The Definition of a Trade Secret

In order to determine what qualifies as a trade secret, let us first examine the formal definition. A trade secret is defined as any information that is:

– Not generally known to the relevant business circles or to the public. The information should also not be readily accessible.

– Confers some sort of economic benefit on its owner. This benefit must derive specifically from the fact that it is not generally known, and not just from the value of the information itself. It must have commercial value because it is a secret. Commercial value encompasses potential as well as actual value.

– Subject to reasonable steps by the rightful holder of the information to keep it secret. What is reasonable can vary depending on the specific circumstances and from legal jurisdiction to legal jurisdiction.

A trade secret continues for as long as the information is maintained as a trade secret. However, information may no longer be considered to be a trade secret once it becomes easily accessible, is no longer properly protected or has no commercial value.

Trade Secrets vs Confidential Information

Broadly speaking, any confidential business information which provides an enterprise with a competitive edge may be considered a trade secret. However, not all confidential information within an organization qualifies as a trade secret.

In an organization, there may have multiple levels of confidential information, with trade secrets being at the highest level of confidential information. A distinction should be drawn between widely accessible (internal) confidential information and trade secrets which require special governance. This means that the normal processes to manage confidential information may not be considered adequate for managing trade secrets.

Although the terms confidential information and trade secrets as well as proprietary information and even know-how are often used interchangeably, these terms are interpreted differently and the remedies for the unauthorized revelation of such information may also differ.

So although there is substantial overlap between trade secrets and confidential information, they are in fact different things.

So What Qualifies as a Trade Secret?

A trade secret can be 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 subject matter of trade secrets is defined in very broad terms and includes sales methods, distribution methods, consumer profiles, marketing plans, supplier lists, client details, and manufacturing processes. Trade secrets may encompass manufacturing or industrial secrets and commercial secrets.

Trade secrets may exists in any of the three key business dimensions of operational excellence, customer intimacy and product leadership.

Generally speaking, any confidential business information which provides a business with a competitive edge may be considered as a trade secret.

Trade secrets can even protect negative know-how, for example the results of failed experiments.

A final determination of what information constitutes a trade secret will depend on the circumstances of each individual case, but it is clear that the subject matter is very broad indeed.

Perhaps the most famous trade secret is the Coca-Cola formula reputedly stored in a vault in the city of Atlanta. Google’s proprietary search algorithm; KFC’s blend of eleven herbs and spices; and the compound WD-40 (that distinctive spray with thousands of uses) are other famous examples of trade secrets.

Hazel Helps Companies Identify Rank & Protect Their Trade Secrets

The Hazel Trade Secret Asset Management System may help your company manage its trade secrets and trade secret processes. Hazel can keep track of your corporate trade secrets and help you determine an appropriate level of protection for each trade secret recorded. Contact the Hazel Team today to learn more.

For Secrets, I’m Donal O’Connell.

Credits:

Cover image by US Government (https://www.flickr.com/photos/3dphoto/3596096989) [Public domain], via Wikimedia Commons