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What is a Trade Secret and How to Protect Them?

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A trade secret of a business is an intellectual property and is a guarded proprietary information that businesses don’t reveal to the public since it distinguishes a business from its competitors. Research and Development information, Formulas, Software algorithms, ingredients or methods can be guarded as a trade secret.

 

For instance, the original recipe of the delicious KFC was never written down by Colonel Sanders. Eventually, a physical copy was made and has been guarded as a trade secret to this day.

It is said that the original handwritten recipe is kept in a safe location in Kentucky and only a handful of employees know the entire recipe and are bound by a confidentiality agreement.

Other examples include Google’s software search algorithm and Coca-Cola recipe.

These companies have chosen to brand an integral part of their company as a trade secret rather than patenting it, since will lead to the disclosure of information.

How are Trade Secrets Protected?

Unlike patents, copyrights, and trademarks, a trade secret can be protected without a registration or any procedural formalities, and this makes the validity of a trade secret unlimited.

Several countries around the world look at trade secrets differently. Depending on the legal system, it might fall under the protection under unfair competition.

However, the TRIPS Agreement (Trade-related aspects of Intellectual Property specifies certain general guidelines.

 

  • The information must be a secret and not be known to people who would generally know such information
  • It must have a certain commercial value
  • Steps must be taken by the proprietor to keep the information a secret, such as confidentiality agreements, etc.

Precautionary Steps to Protect your Trade Secret

Since trade secrets don’t have any procedural requisites, it’s a very popular option used by Small and Medium businesses to protect their intellectual property assets. However, here are a few points to consider.

 

  • Analyse if it would be better to patent the secret. For instance, while patenting can prove to be expensive, it matters when you want to license or sell your IP asset.
  • Keep the circle tight, trade secrets must be treated as confidential information. For instance, it is rumored that only two people know Coca-Cola’s recipe.
  • Put confidentiality agreements in place to ensure that employees and business partners don’t reveal any information to third parties.  

Patent vs. Trade Secret

When dealing with patentable processes and inventions, many businesses are caught between the options of keeping it as a trade secret or patenting.

Unlike patent, copyright and trademark registration, trade secrets are intellectual property assets that require no cost. They also have the additional advantage of having an indefinite validity.

However, once the secret is made public and disclosed, it might not be possible to patent it, and anyone would be able to access it and use it.

 

While the compliance formalities are low, it does not provide any rights, such as the exclusive right to use. Anyone else who has come up with the same process/invention will not only be free to use it, but also patent it.