If your innovations are the foundation of your business success, your intellectual property should be the backbone of your whole company. While formal filings like patents and trademarks might be the first thing that comes to mind when you think about IP, there’s a lot more to intellectual property than just patents and trademarks. An underrated option is a strong trade secret policy.
Here’s what all business owners need to know about trade secrets and why it’s so important to protect yours.
What is a Trade Secret?
According to the USPTO, a trade secret is information with potential or actual economic value by virtue of not being known, information that has value to others who cannot legitimately obtain it, and information that is subject to reasonable efforts to maintain its secrecy.
Basically, it’s information that you deliberately keep secret because it gives you a competitive advantage (and thus economic value), and because of this, your competitors would profit from having those secrets but cannot obtain them legitimately.
If any of those three elements (namely valuable, secret, and protected) is missing, you no longer have a trade secret. But if all three elements are present and you have a trade secret, there is no limit to the amount of time a trade secret may be legally protected.
Trade Secret vs. Patent
A trade secret and a patent are two very different things.
In a way, all patents begin as trade secrets. Before being filed as a patent application, most inventions that became the basis of the patent application were considered to be valuable by the company, kept a secret from others outside of the company, and protected using mechanisms like password-protected databases and even a simple lock and key. Because issued patents grant the owner of those patents a monopoly to commercially profit from the patented inventions, the tradeoff is that those patented inventions will revert to the public after a certain number of years. In other words, the filing documents related to the invention are part of an agreement between the inventor and the issuing body, in which the patent owner is granted the exclusive legal right to profit commercially from their invention for a set period of time in exchange for publicly disclosing the invention.
On the other hand, if the innovation is something that can’t be detected by others even by reverse engineering, the owner may choose to protect that innovation using trade secrets. In much the same way that top-secret documents are protected in government circles because of the value they may provide to other countries, trade secrets are the classified documents of the business world.
Another key difference between a trade secret and a patent is what form they take. A utility patent, for example, must be a new or improved process, product, or machine. A trade secret is much more versatile–it could be anything from a proprietary process to a formula to a recipe.
What Information is Protected as Trade Secrets?
Trade secrets can provide more flexibility than a patent filing in protecting the relevant innovation. While you can’t enforce infringement of a trade secret in the courts the way you can protect a patented invention, you can protect various aspects of your competitive advantage using trade secrets. A process for assembling a car in a way that makes its interior 90% quieter than the competitor? Trade secret. Your grandma’s secret recipe for those chocolate chip cookies that keep selling out at your coffee shop? Trade secret. The list of investors in your stealth technology startup company? Trade secret.
Oftentimes, trade secrets protect aspects of an invention that may not be easily discoverable or reverse engineerable. For instance, a company might file a patent application for a widget, and keep the process for assembling the widget a trade secret. Coca-Cola, for a real life example, has a design patent on the original curvy Coca-Cola bottle, but the original Coca-Cola recipe is a trade secret.
That said, almost anything that gives a company a competitive advantage could be classified as a trade secret. It could be technical information, like pharmaceutical test data, or it could be commercial information, like your marketing strategies or distribution methods. We work with several clients who use a combination of trade secrets, utility and design patent filings, trademark registrations, and copyright protection in their IP strategies. In fact, the topic of trade secret enforcement was a prominent part of a conversation we had with Joan Kanner, the co-founder of a small batch bagel shop Bottoms Up Bagels in Baltimore!
Why Keep Information Protected?
In order for something to be considered a trade secret, your company must make a deliberate effort to keep it a secret due to the competitive advantage it offers you. That is, even if you have identified some piece of information as something you’d like to protect as a trade secret because of its value, it must be actively protected to be considered a trade secret. For example, even if you think an ex-employee got their new job as a competitor by offering to share your trade secrets, you may not prevail in the courts if you can’t show that you took steps to actually protect your secret information.
The key here is a trade secret policy. In order to take advantage of federal and state laws related to trade secrets, you’ll need to have an implemented trade secret policy which identifies specific pieces of information as valuable company trade secrets, and establishes policies and procedures related to keeping those pieces of information as secrets protected from those outside of your company.
The Rising Importance of Trade Secrets
As workplace trends shift more and more in the direction of workplace mobility, it’s more important than ever to keep your most valuable information a secret. Add in rising interconnectivity, networking, and global data storage on the cloud, and you have an environment with an increased risk of misappropriation. That means that you have to govern how sensitive information is managed in your company and go the extra mile to make sure your trade secrets stay secret, especially as your company grows and evolves. Consider using a robust trade secret policy as part of your intellectual property arsenal.
Let’s be honest: intellectual property can be a headache. Trade secrets make it even harder. This is information that gives you a competitive advantage and is just as closely guarded as your patents, but it’s also bandied about more informally, which means it’s on you to protect your secrets.
Our job is to take the headache out of intellectual property with expert patent management services to guide you through every stage of innovation. That way, you can stop worrying about IP and focus on making your business stronger.
Sounds good? Then get in touch today to learn more.