Trade Secrets the most important intellectual property right you knew nothing about

Trade secrets help build and maintain competitive advantage

• Increase security for customers, investors, employees and partners
• Improve innovation structure protecting valuable new ideas and concepts
• Enhance increased collaboration with partners
• Value contributing to negotiations and licensing

Rapid information flows threaten competitive advantage by exposing secrets
In these days of ubiquitous connectivity, more connections mean more data, mean more threats and more risk.
 

• Digital. Rapid advancements in the digitisation of business, and its acceleration through the pandemic mean more ‘secrets’ are networked, on the intranet, internet or on the cloud.

 

• Cyber-crime. Technology, the internet, networked data, and cyber threats make data transfer easier and more difficult to contain than ever before. Cyber-crime increased 600% during the pandemic with half of all SMBs experiencing a breach last year.

 

• No business is an island. Businesses exist within an ecosystem of collaborations, partnerships, research projects, franchising, sales and supplier deals, investment arrangements, outsource, insource and licensing agreements.

 

• Valuable and secret information will be lost It is a fact of life that given all of the above, the flows of information and secrets have never been more porous. It is not a case of if but when! Most secrets are misappropriated through current and ex-employees, past collaboration partners (see above) and hacking or cyber theft.

  
Trade secrets
Definition of trade secrets: A trade secret is a formula, practice, innovation, know-how, 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 scope of trade secrets is virtually unlimited.
  
Specifically, for a practice or process or knowledge of a company to be considered a trade secret it must include four concepts:

a) it is business-related technical or commercial information, 
b) it must not be known to the public, (i.e. it is secret),
c) its secrecy must provide an actual or potential economic advantage for the company,
d) there must be a reasonable effort to protect it against disclosure (i.e. the company exercises reasonable measures to maintain it as a secret).
 

The subject matter of trade secrets is usually defined in broad terms and includes sales methods, business strategies, distribution methods, inventions, consumer profiles, marketing plans, supplier lists, pricing information, client details, and manufacturing processes. 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; the lubricating spray WD-40, are other famous examples of trade secrets.
 
There are no registration costs and no (annual) maintenance fees paid to governmental bodies with trade secrets.

Trade secrets survive as long as they can be kept secret, unlike a patent which expires after 20 years.
 


Legal changes

Recently, the EU, USA Japan and China amended their legal frameworks for trade secrets. The new laws are more precise than previous ones as to their scope and the types of secrets they regulate. These legal changes concern how trade secrets can be objects for licensing and knowledge sharing as functions of collaboration and open innovation. Trade secrets are now a significant part of nation state negotiation of trade deals, especially with the US.  
 
Legal Developments

·      2016 USA Defend Trade Secrets Act 
 
·      2016 Europe Trade Secret Directive (adopted in English Law in 2018)
 
·      2018 Japan Unfair Competition Prevention Act
 
·      2017, 2019 China - Anti Unfair Competition Law
  
Breaking news. Recent high profile cases
 
·      UK’s First Injunction Secured under Trade Secrets RegulationsFebruary 1, 2021 US company Celgard, LLC has secured an interim injunction against its rival, Chinese company Shenzhen Senior Technology Material Co Ltd (“Senior”), that prevents Senior from importing or supplying its battery accessory products into the UK
o   https://www.iptechblog.com/2021/02/uks-first-injunction-secured-under-trade-secrets-regulations/#page=1
 

• Levandowski Co-founder of Google’s self-driving car, sentenced to 18 months in prison (received presidential pardon 21 Jan 2021) for stealing trade secrets and allegedly using them to help build a rival driverless programme at Uber. Uber (Otto) settled in Feb 2018 by providing Google with a $245M equity stake!

 

• A former Tesla employee agreed to pay $400,000 to settle the company’s lawsuit over claims he hacked a confidential manufacturing operating system, stole more than several gigabytes of data, and leaked trade secrets to a news reporter. December, 2020.

 

• Apple, March 2021.
  • https://www.businessinsider.com/apple-lawsuit-former-employee-stealing-trade-secrets-journalist-project-x-2021-3?r=US&IR=T

 
 

Keys to success
 

What matters is how managers educate and train their business to keep secrets as secrets, how the secrets are used for sharing knowledge within an organization and with third parties, and how the secrets are combined with other measures, such as patents and copyright, to create and maintain competitive advantages.
 
Taking proactive steps now helps comply with any regulatory, data governance and intellectual property ISO standard requirements.
 
Deterrence is much better than legal disputes. Developing a robust trade secret policy, programme and governance procedures will reduce the likelihood of a breach, help you respond to a breach and retrieve any value that may be at risk of loss.
  
Exalt IP Trade Secret Programme
 

1. Audit to capture and identify all trade secrets and confidential information

 

1. Processes in place to protect this information
   • Categorisation of the importance (value and impact) of secrets high to low
   • Register to capture all secrets and meta data
   • Trade secret policies and procedures
     • e.g Processes to
       • identify and capture new trade secrets e.g. innovation policy
       • deal with a breach should it happen
   • Governance methods

 

1. Reinforce the importance and value of trade secrets and confidentiality to employees, partners and customers 
   • Education and training
   • Audit of ‘partner’ policies
   • Employee and external contracts protect trade secrets
   • NDAs (specifically attending to the potentially infinite life of a trade secret, ie not governed by the usual fixed term)

 
 
 
 
For more information: john@exaltip.com     +44 7587 885 131
 
 
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