Trade secrets: when, how and why to use them

Most innovators are familiar with the use of patents to keep their technology out of the hands of competitors. Patents are powerful legal rights that enable the patent owner to prevent others from making or using the patented invention, in a country where the patent is in force. However, there may be knowledge that is core to your business but which is not compatible with patent protection. This is where trade secrets come in.

A trade secret is information that a business wants to keep confidential because doing so provides the business with a competitive advantage. In addition to potentially lasting indefinitely, an advantage of trade secrets is that there are no specific legal requirements for information to qualify as a trade secret; unlike patents, there is no novelty or inventive step hurdle to overcome.

That said, while there is no formal process to register trade secrets in the same way as patents and registered trademarks, it isn’t enough to simply decide that something is a trade secret. To benefit from protection, a trade secret must be information that is a) secret, b) has commercial value because it is secret, and c) has been subject to reasonable steps to keep it secret.

In particular, the last point means that you need to have a process in place for protecting confidential information. The importance of adequate procedures for handling trade secrets was highlighted last year when a former Coca Cola employee was convicted of trade secret theft in the USA. The trial focused not only on the actions of the former employee, but also on the security measures put in place by her employers to protect their confidential information.

Actions that you can take to ensure that your information is protected as a trade secret may include some – or indeed all – of the following strategies:

• Documenting your trade secrets in an internal or external registry;

• Restricting employee access to confidential documents;

• Developing a policy for handling trade secrets;

• Providing training to employees on how to identify and protect trade secrets;

• Putting in place a plan for unauthorized disclosures of trade secrets;

• Ensuring that you have suitable confidentiality and non-disclosure agreements in place with employees and business partners.

So, how do you decide whether to protect your assets via a patent or a trade secret? As mentioned above, some types of innovations, like large databases, do not lend themselves to patent protection and are best protected via trade secrets. In some cases, a new composition may be suitable for patent protection, but if the elements of that composition cannot be reverse-engineered through analysis of the commercial product, a greater benefit may be gained by retaining the information as a trade secret. Alternatively, it may be that a patent is used to protect part of an innovation – e.g. a new process – while certain aspects of that innovation, such as the specific process conditions required for scale-up, are kept as a trade secret.

A trade secret may be considered if a business wants to keep the secret for longer than 20 years (the maximum monopoly right obtainable through patent protection, subject to possible extensions in certain technical areas). It should be kept in mind though that proving a breach of a trade secret and assessing loss might be more challenging than proving patent infringement. Also, if trade secret protection is breached, patenting would then not be possible. As such, patents are normally the first consideration for novel and inventive technologies.

Trade secrets can complement other forms of IP in your portfolio including patents, trademarks, designs and copyright, and provide a valuable business asset. Implementing a trade secrets policy as part of your overall IP strategy will help to prevent leaks of confidential information, and shows value to potential investors by demonstrating that you are taking steps to protect core business assets.

Jennifer Bailey is a Partner at HGF. She is an experienced European Patent Attorney, having practised in the field of IP for more than 10 years. Her technical expertise spans a wide range of sectors including life sciences, chemistry, materials and food science. This article was republished from the October/November 2023 edition of Protein Production Technology International, the industry's leading resource for alternative proteins. To subscribe to read future editions hot off the digital press, please click here