Data from the National Center for Science and Engineering Statistics shows that many U.S. businesses regard trade secrets as more valuable than other types of IP protection. 51.7% of companies that funded or performed research and development agreed that trade secrets are invaluable to protecting their business. Meanwhile, 76.2% viewed them as important in general.
What are trade secrets and why does this type of IP protection matter to your business? Let’s dive into some examples of trade secrets and much more so you can leverage them for your IP strategy.
What Are Trade Secrets and How Do They Protect Your Business?
U.S. law defines trade secrets as any form of business, economic, financial, engineering, scientific, or technical information the rightful owner keeps secret through reasonable and sustainable measures. Trade secrets have an independent economic value that stems from the fact that they are generally unknown to the public.
Trade secrets are a very important type of IP protection for R&D-centric businesses and organizations. They’re as valuable as copyrights, design patents, utility patents, mask works, and trademarks for any business that conducts or funds research.
Trade secrets include compilations, devices, technology, techniques, methods, formulas, programs, or processes. Their unique value stems from the fact that they are a secret, and the organization can monopolize the IP protection for their own benefit, whether its profit or any other type of leverage.
There are various ways that a trade secret can protect your business and contribute to your growth and innovation. These benefits will ultimately depend on the nature of your business, which industry you’re in, and who your competitors are. Generally speaking, these are some of the most common advantages of trade secret protection:
- Unlike patents, which only last for 20 years, trade secret protection has no time limit if the appropriate steps are taken to preserve your trade secret rights.
- There are no registration costs or maintenance fees to protect your trade secrets. However, there are situations wherein keeping highly confidential information entails high costs and extensive security measures.
- Trade secrets protect the profitability of your business as no other business can copy your formula, process, program, techniques, or technology.
- If marketed correctly, trade secrets can help increase curiosity around your brand. This garners the interest of more consumers.
We recommend getting legal advice from trade secret law experts to better understand how trade secrets affects your specific business.
What Are Some Notable Examples of Trade Secrets?
Trade secrets provide a critical competitive advantage over your competitors. Thus, companies go to great lengths to ensure they are protected. The illegal or unauthorized misappropriation, disclosure, or use of confidential information trade secret information is illegal and actionable with both civil and criminal penalties.
Something as simple as a company’s client list may be considered a trade secret. Ask yourself: how advantageous would it be to my competitors if they had my customer list? But to better understand how you can leverage trade secrets for your business, let’s look at some notable examples of trade secrets from different industries.
Google’s Search Algorithm
Every year, Google makes thousands of changes to its algorithm to ensure it presents the most relevant results for search engine users. Additionally, the search engine giant constantly modifies its algorithm to prevent third parties from gaming the system and showing up higher on search results than they should. The impact is evident — Google remains the top search engine globally.
Coca-Cola’s Coke Syrup Formula
Since 1981the Coca-Cola Company decided to keep its Coke syrup recipe a trade secret and have since paced in within a vault in its Atlanta headquarters where it may be publicly displayed. Coca-Cola vetoed the idea of patenting it because they would have to disclose the ingredients. In 2006, an employee and two accomplices attempted to sell the formula to Pepsi for 1.5 million dollars. Despite being its biggest competitor, Pepsi informed Coca-Cola of the attempted corporate espionage.
KFC’s Original Recipe
Colonel Sanders kept the secret ingredients of KFC’s original recipe in his mind for a long time. Nobody else knew the exact mixture of herbs and spices used to make their famous fried chicken. Eventually, he wrote it down for a select few to safeguard; they were required to enter a confidentiality agreement beforehand. It is said the original handwritten recipe is securely locked in a safe in Kentucky.
McDonald’s Big Mac Special Sauce
McDonald’s has more than 39,000 franchises worldwide, making it the largest fast-food chain today. It has special menu items in different countries, but the Big Mac recipe remains the same. Particularly, Big Mac’s special sauce is a trade secret closely guarded by the company.
WD-40’s Multi-use Product Formula
WD-40 is a globally renowned product of an independent public company that works in more than 15 countries worldwide. The multi-use product was initially designed to address corrosion, but it currently has over 2,000 documented uses. Considering the high value of its famous formula, the company ensured only one person knows the exact ingredients. Filing for a patent never even crossed their mind.
How Do You Use Trade Secret Protection in Your Business?
Healthy and fair competition is a major driving force for economic progress and innovation and exists in all market economies.
Protection of trade secrets may be necessary to maintain the upper hand in a highly dynamic market. It helps you protect the confidential information that keeps your business going, ensuring fairness. By declaring something a trade secret, you provide legal protection for your assets and maintain your competitive advantage.
Trade secret protection allows you to file a case for the following:
- Breach of contract
- Breach of confidence
- Industrial espionage
- Commercial espionage
When Does a Trade Secret Become Public Information?
Patent protection typically lasts 20 years, and copyright protection extends up to 70 years after an author’s demise. Trademark protection has no limits, but it must be renewed every 10 years. Meanwhile, a trade secret may remain hidden from the public forever.
Trade secrets don’t need federal registration or procedural formalities for them to be protected. They can remain classified for an unlimited duration unless:
- The trade secret was discovered by the public
- The owner decides to disclose it to the public
- The secret information was legally acquired by another entity
The general public isn’t entitled to know your trade secrets at any time.
What Is an Example of Something That Can Only Be Protected by a Trade Secret?
The decision to patent something or keep it a trade secret is ultimately made on a case-to-case basis. However, trade secret protection is recommended for sensitive or valuable information that doesn’t meet the criteria for patentability.
You might want to consider trade secret protection when:
- Confidential or sensitive information is not patentable
- The information is related to a manufacturing process, not a product
- The information can likely remain secret for a considerable period
Remember that trade secret protection merely acts upon the illicit acquisition, disclosure, or use of sensitive data and confidential information. As a result, trade secrets are more challenging to enforce than patents.
What Cannot Be Protected Under Trade Secret Law?
Something may only qualify for trade secret protection if:
- Knowledge or information is valuable primarily because it is not generally known or readily available to the public
- The owner of the information can prove that they take fair and reasonable efforts to maintain its secrecy
How Do You Prove a Trade Secret?
Based on common law, a mere idea generally cannot be protected as a trade secret. However, specific ideas may be considered trade secrets if they can prove the following elements:
- It’s a novel or original idea that stemmed from the business entity
- The idea has been reduced to a concrete form
- The idea was disclosed in a confidential manner
- The idea is used for business or trade purposes
Regardless of whether a trade secret is an idea or information, the owner must prove that it provides some value to the business and that there is a lack of general knowledge about it in the public domain. Moreover, a trade secret owner must be able to prove their efforts in protecting the secrecy of the idea or information.
What Are the 3 Critical Components of a Trade Secret?
The three major elements of a trade secret are:
- The idea or information is confidential;
- The value of the information provides a competitive advantage for the owner; and
- The owner or guardians establish security measures and make reasonable efforts to keep the idea or information secret.
What Is the Uniform Trade Secrets Act (UTSA) and What Is Its Impact on Businesses?
The Uniform Trade Secrets Act (UTSA) is a model act that provides legal protection for trade secrets. It governs civil actions for the misappropriation of trade secrets. Its remedies include attorneys’ fees, exemplary damages, statutory damage, and injunctive relief. The remedies depend on the extent of the trade secret misappropriation, the manner of misappropriation, and the damages sustained by the owner.
USTA is different from the Defend Trade Secrets Act (DTSA), which allows businesses to sue another party or entity for the misappropriation of their trade secrets.
Trade secrets are invaluable business assets that give you a competitive advantage in a dynamic market. In terms of IP protection, however, they are more complex than patents, trademarks, and copyright. USTA and DTSA are both greatly beneficial to your business because they define and provide legal protection for your trade secrets
How Can Trade Secrets Be Used Alongside Other Types of IP Protection?
Are patents, trademarks, and trade secrets mutually exclusive? Do you have to choose among them to protect your business and maintain a competitive advantage? Not quite.
Patents and trade secrets work differently. When you file a patent, you get federal protection for your intellectual property for 20 years. However, you must disclose the idea or information. Trade secrets can indefinitely remain just that — secret. But they can have a symbiotic relationship that enhances your overall IP strategy, increases your competitive edge, and boosts your company’s value. Here’s how:
- A patent cannot protect everything. What doesn’t meet the requirements of the patenting process might be eligible for trade secret protection.
- The patenting process does not automatically disclose confidential or secret information. So even with a patent, your business can still maintain a level of trade secret protection, such as the measurement of ingredients used in a recipe or the measurements or dimensions of a product your business is known for.
- If you can withhold certain information during your utility patent application and still meet the requirements, the withheld information can be trade secrets.
Although these types of intellectual property have a symbiotic relationship, and your business would do well to combine them in your IP strategy, they aren’t protected in the same way. Patents and trademarks provide more comprehensive protection than trade secrets. Learn more about patents, trademarks, and copyrights below:
Patents grant the patent owner the exclusive right to produce, use, sell, or import an idea or invention. They essentially grant a business limited monopoly in exchange for information disclosure. U.S. patents may come in three forms: Utility, design, and plant.
Patents typically cost more than other types of IP protection but can generate good ROI. Start-ups can secure more investors if they have proof of IP ownership. Patents may also be used to market your product or technology as superior to competitors.
But, you need more than a good patent to protect your business. Work with a reputable law firm to discuss how you can leverage technology patents.
A trademark refers to names, brands, logo, slogans, designs, or any combination of these elements to indicate the source of a product or service. It distinguishes your company as the source of a specific product or service and represent the goodwill that trademark holders have established in their goods or services. It’s also the foundation of brand identity, contributing to the collective impact of your business or its products and services.
Our trademark registration service offers guaranteed trademark approval or your money back. You can learn more about this when you schedule a free consultation with us.
Copyright registration gives the owner of an original creative work the exclusive right to authorize the adaptation, distribution, reproduction, and public display of their work.
It also gives them the right to authorize who can sell copies of their work. It additionally provides legal protection for the owner and lets them recover damages for copyright infringement.
Copyright protection encompasses a wide range of original works and artistic expression, including but not limited to books, photographs, art, literature, music and live performances, movies, software programs, business plans, and websites. Reach out to one of our lawyers to learn more about copyright registration and protection.
Develop a Customized IP Strategy for your Business
Combining patents and trade secrets can be commercially beneficial for your business. A comprehensive IP strategy that includes patents, trademarks, and trade secrets might also bring greater value to your company. Before you can do this, however, you must review federal and state laws to determine the best approach to your strategy. The Rapacke Law Group can walk you through the intricacies of intellectual property and help you implement a foolproof IP strategy. Schedule a free phone consultation