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Importance of Trade Secret

Importance of Trade Secret

Immense investments, global competition, and other factors make stealing secrets a probability 

 

Today, companies keep critical operational and business information protected from their competitors, who could potentially use it to their advantage. The significance of trade secret protection has grown in recent times because of the high stakes involved in an increasingly competitive age. It’s a rather obvious inference from the growing number of trade secret cases in the courts in recent years.

 

Some of the examples of trade secrets include the secret formula of Coca Cola, the chemical composition of Listerine mouthwash, and even the Maharaja Mac’s special sauce that is made by McDonald’s. While these are just examples, it is the formula that makes them unique from their competitors, which is why trade secret protection has become so important.

 

  • Massive investments: 

    In present times, companies spend crores of rupees and years of effort to develop new products and services. Their efforts are wasted if competitors can copy their creations easily because of inadequate trade secret protection. According to a Forbes study, it costs a pharmaceutical company an average of $350 million to develop a new drug. Costs may rise to as high as a few billion dollars for an innovative new product. Hence, these companies would want to keep their trade secrets secure so that they benefit from the investment.

 

  • Smooth flow of information: 

    There was a time when trade secrets were written on paper and locked away in a secure safe. Today with the advent of technology, everything is digital and electronic, and the mode of spreading information has become more accessible. A mobile phone or computer hack or pen drive is all it takes to broadcast trade secrets.

 

  • Change in attitudes of employees: 

    Employee loyalty is not something one can take for granted in the current times. Unlike in the past, where one person would stick to the same job until retirement, employees today move companies. Attrition levels are high, especially in areas, where skills are in short supply. Employees, therefore, don’t have a high sense of loyalty to their companies. There will always be people willing to sell trade secrets to competitors in exchange for a substantial reward.

 

  • The growing number of trade secrets:

    Trade secret protection has become immensely tricky by the enormous volume it encompasses. Because of increasing economic complexity and competition, the definition of what constitutes a trade secret has widened. A manufacturing method, experiments, source code, a prototype, and even the salary of an employee could fall within the periphery of trade secrets. The problem is, courts find it harder to determine what is permissible and what is not, leading to endless litigation.

 

  • Globalization: 

    The world has never been as interconnected as it is today. Goods, services, information, and ideas flow more or less seamlessly across borders. You can share information across boundaries in little time. Companies and organizations not only contend with local competitors but also organizations in other countries as well. It is therefore conceivable that courts in all countries may not accept the same definition of a `trade secret’. Companies may spend years and vast resources developing new products and services only to find competitors in other countries copying them with impunity and reaping the rewards.

 

Maintaining organizational secrecy and security is a critical feature of a thriving business. Therefore, it is crucial for business owners to understand how to manage their trade secrets and what they need to do in case they are pushed to take legal action if a trade secret is compromised.

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