What is a Trade Secret? Understanding Types & Importance | IPTSE

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What is a trade secret

What is a trade secret

What is a trade secret, and what protection does it enjoy under the law?


Before understanding what trade secrets are, we must first understand the role of innovation in a modern capitalist system. The benchmark/reputation/success of a company hinges on their unique product and service offering, as it differentiates it from the rest to occupy a unique niche in the marketplace. Naturally, no company would like competitors to find out how it does things and dilute its competitive edge; these are its ‘trade secrets.’ Trade secrets can protect a company’s confidential business information. This information usually distinguishes a company and sets it apart from rivals.


Types of trade secrets


Trade secrets may include:


  • The ingredients used in the product: 

    For example, soft drinks manufacturer Coca-Cola keeps its ingredients a closely-guarded secret and the recipe is accessible only to a select few.


  • Way of manufacturing: 

    A company may get a competitive edge just by finding a new way of making things. These may include types of manufacturing equipment, processes or systems. For example, computer chip maker Intel came up with ‘Copy Exactly!’ to ensure consistent quality of products regardless of where it was manufactured.


  • Way of selling and distribution:

    Companies often devise unique methods of selling and distributing products, which may give them an extra edge. A fitting example would be food brand Kellogg’s coming up with a data-sharing strategy with retailers to reduce unsold inventory.


  • Advertising strategies: 

    The success of any product or service also depends on the way of advertising. Firms will always want to keep their ad strategies protected. Most firms take necessary precautions to prevent inadvertent disclosure of trade secrets. This is because if a trade secret is disclosed, it is no longer possible to protect information, particulaly in the age of social media. This is why most companies, while recruiting an agency to create an advertisement for business, will be required to keep a watch on who has access to the company’s confidential business.


What is trade secret law? 


A trade secret can be referred to as IPR, and the law does offer some amount of protection against its misuse. However, there are some differences between trade secrets and other forms of intellectual property. Unlike patents, you don’t need to register a trade secret with the authorities or make a public disclosure. There are some conditions on information being considered a trade secret. These conditions differ from one country to another. The first international steps to protect trade secrets were taken by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).


What about trade secrets in IPR?


Protection of undisclosed information (trade secrets) is dealt with under Article 39 of TRIPS. Companies and individuals can prevent information from being disclosed without their consent if;

  • It is not known or readily accessible to people within the circles that usually deal with the information in question.


  • Has commercial value being secret and has been made subject to steps, by the person lawfully in control of the data, to keep it protected.*


Usually, companies restrict information to only a few individuals. These individuals have to sign confidentiality pacts so that the information is kept within the company and not made accessible to outsiders. Recourse to the law can take place if there is a breach in the confidentiality agreement.


Trade secrets are part of any innovative company’s armory. While they may not enjoy the same level of protection as other IPR-like patents, firms are backed by law if a trade secret is misappropriated.

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