Trade Secrets

I used several examples of big companies having high profile trade secrets. However, the reality is that most trade secrets are a little more … mundane.

Trade secrets can include any information that is secret and valuable. For a business this can include:

• Customer data
• Computer programs
• Financial records
• Future or proposed products or services
• Marketing plans
• Raw data
• Schematics
• Source code
• Supplier identities
• Research & Development plans

If a competitor obtained this information they could use it to poach customers, change their strategy, and obtain necessary components to build copycat products or services.

So, you likely have secret and valuable information, but do you have trade secrets? Only if you protect this information.

You must take reasonable measures to protect your secret and valuable information if you want to turn it into trade secrets. So what is a reasonable measure?

For KFC, it was building a high-tech safe. For you, it can be as simple as a password.

********
Password must be at least eight characters, include a number, an uppercase letter, a non-standard character, and a haiku.

Starting out, you can encrypt your files so that someone else, legally or not, cannot access them. As your business grows, you can add additional measures to secure your secret and valuable information. For example, when you present this information to an investor or supplier, you can have them sign a non-disclosure agreement (NDA); when you hire an employee you can have the employment agreement specify what information is a trade secret and what steps the employee has to take to safeguard this information, and-if it comes to it-you can even put a safe with 24/7 surveillance in your corporate headquarters for any especially vital information.

There is no one-size-fits-all approach to trade secrets, but being proactive about protection can insure that any secret and valuable information stays that way.

Improper Means

Improper means involves breaking a law to uncover a trade secret. If trade secret information was stored on a computer, then breaking into an office and stealing the computer itself is an example of improper means.

Breach of Confidence

A breach of confidence involves using social engineering to get access to trade secret information. Pretending to be an employee in order to get access to protected files would be a breach of confidence.

Independent Discovery

Independent discovery is when someone else independently discovers the trade secret information. This could happen if two people independently come to the same conclusion, and one of them discloses it to the public.

Inadvertent Disclosure

Inadvertent disclosure is when the trade secret is disclosed by the company that was keeping it a secret. Let’s say a company accidentally publishes or otherwise makes their trade secret available to the public.

Reverse Engineering

Reverse engineering is the process of disassembling something to learn how it works. The component suppliers for a computer could be held as a trade secret, but would be discovered as soon as someone takes the computer apart to discover its components.

The possibility of reverse engineering is an important consideration in choosing between a trade secret and a utility patent. A utility patent has a limited lifetime as compared to the potentially infinite lifetime of a trade secret. However, a trade secret loses its protection once it is no longer a secret. If a product can be reverse engineered, then it may make more sense to protect the product with a utility patent.

In practice, the distinction between utility patents and trade secrets is not as black and white. There are often some components of an invention that can be easily reverse engineered and would be better protected by a utility patent. There may be other components of the invention which cannot be, or are not easily, reverse engineered. The easily reverse engineered elements can be protected with a utility patent, while the hideable elements can be protected as a trade secret.