Reviewed by Akshay Thaman, IP and Policy Lead | 12 September 2024
A trade secret is the information or know-how belonging to a company that is kept confidential due to the value it brings to the business. Typical examples of a trade secret may be a secret ingredient within a recipe (or the recipe as a whole), or a chemical compound that is the ‘secret sauce’ within a product or a process. The decision to maintain an innovation as a trade secret is primarily driven by the need to preserve a competitive advantage against others through secrecy, for example; company ‘X’ does not want the group of companies ‘Y’ to know about invention ‘Z’ because invention ‘Z’ may be a key differentiator between the companies.
Patents offer the exclusive right to the owner to prevent others from using their invention for up to 20 years, in exchange for the blueprint detailing what the invention is, how the invention works and how it should be carried out. The patent system offers a relatively secure protection of an innovation backed by a rigorous legal system that has had time to evolve both in statute and also in case law. In comparison, up until 2018, there was a great uncertainty as to what qualified as a trade secret, how to seek protection and when you should choose to protect an innovation as a trade secret over and above pursuing a patent. The Trade Secrets Directive now provides greater clarity. The Trade Secrets Directive was drafted by the European Council and it was later implemented in the UK in 2018 through the Trade Secrets Regulation, and Regulation 2 outlines the criteria to be met to qualify for trade secret protection. It states that the relevant legal entity has to ensure that the subject matter…
In other words, to qualify for trade secret protection the subject matter must be a secret and only be disclosed to those who need to have knowledge of it. In addition, it must have some commercial value and there must be steps put in place to ensure that the trade secret is recorded and maintained securely.
Unlike patents, which gives the owner the right to stop others from carrying out the patented invention, a trade secret offers protection against the unlawful acquisition, use or disclosure of a trade secret whereby the acquisition, use or disclosure constitutes a breach of confidence in confidential information. To enjoy such protection, it is crucial that businesses implement a robust process (or processes) to manage their trade secrets, ensuring that criteria 1 and 3 are satisfied.
Companies should be weighing up the pros and cons of considering their innovation as a trade secret or following the route towards a patent. It may be that both options are explored at different stages within the product cycle. What is clear is that this should form part of a wider discussion on IP strategy and planning which will consider protection, competitive advantage and commercial benefit as a whole.
