Trade Secrets

The fourth type of intellectual property concerns trade secrets, which protect information, such as a formula, pattern, compilation, program, device, method, technique or service. A trade secret has two main characteristics: It is information that has reasonable measures in place to protect or restrict access, and it derives its economic value from not being disclosed to competitors or the public.

Coca Cola’s soda formula, McDonald’s’ special sauce and Google’s search algorithm are all examples of proprietary information that is central to a company’s competitive advantage and its very survival.

Nearly every business has trade secrets in one form or another. Things like customer lists, manufacturing processes, software code and strategic plans are examples. Most of these aren’t truly trade secrets since extraneous measures have never been put in place to protect the information. Plus, a lot of this information can be reverse-engineered, and once it is, it ceases to be a trade secret.

Reasonable measures put in place to protect a trade secret can include technological or physical safeguards or legal mechanisms such as non-disclosure agreements and work-for-hire and non-compete clauses. Another method is to restrict access to certain parts of a facility where proprietary information is stored or the use of keycards and passcodes. Digital safeguards may include firewalls, two-factor authentication and encryption.

These measures help demonstrate that the information is indeed a trade secret, should litigation occur. Unlike patents, trade secrets protections can continue indefinitely, until the secret is revealed or reverse engineered.