Trade secrets are a valuable and powerful business tool that can give a company an edge over its competitors. They are safeguarded by law, but there is no formal registration process. Trade secrets can be any formula, pattern, physical device, idea, process, or collection of information that provides the owner of that information with an advantage in the market and is managed in a way that demonstrates that the owner intends to prevent the public or competitors from finding out, stealing, or using it. Protection of trade secrets lasts only as long as the trade secret remains that way, but it can last forever if no one reveals it.
Courts can protect a trade secret by ordering that the misappropriation be stopped, that the secret be protected from public exposure, and in extraordinary circumstances, by ordering the seizure of the embezzled trade secret. At the end of a trade secret case, courts can award compensation for damages, court costs, reasonable attorneys' fees, and a permanent court order, if warranted. If you think you have business information that could be considered a trade secret, there are certain conditions you should be aware of. The information must not be generally known or accessible to the people in your company who usually deal with such information, it must have a commercial value in its secrecy and must be managed with reasonable efforts to keep it secret. These efforts can include labeling related documents as “confidential”, ensuring adequate computer security, and keeping information under lock and key in a safe. It's also important to note that a competing company can discover and patent the same information that you developed and kept as a trade secret.
If your company continuously creates and maintains a strong intellectual property portfolio, it can prevent competitors from launching products or services that can surpass yours, allow you to license your intellectual property to third parties to increase your revenue stream, and help you maintain the favorable perception of your brand in the market. A trade secret is more difficult to enforce than other forms of intellectual property, and the type of protection afforded to trade secrets is comparatively weak and can vary from country to country. If you're concerned that a competitor's research and development program will eventually catch up with you and develop a similar idea, patent protection may be more appropriate than a trade secret. If your trade secret protects something that could also be protected by a patent, it might be worth considering whether patent protection might be more useful to you. It is often essential that information which could be (or become) a trade secret is kept confidential from the start. A trade secrets policy is critical because employees are often the source of revealed trade secrets, whether they do so inadvertently or for personal gain.
Make it clear that the employee's exposure of trade secrets will result in legal action and termination of employment. The Regulation states that the acquisition, use or disclosure of a trade secret is illegal when the acquisition, use or disclosure constitutes a violation of trust in confidential information. So if you think someone could reverse engineer your trade secret, a patent may be a more suitable form of protection than a trade secret. If you have a trade secret or are considering protecting something as one, we encourage you to explore the rest of the NIHF “Guide to Intellectual Property” series which will then address the role of intellectual property in entrepreneurship. Having a confidentiality agreement should remove any doubts about whether your communications are confidential which can dissuade third parties from treating your trade secrets improperly and be extremely useful in any legal action you must take in the future.
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