About Trade Secret
Trade secret includes any valuable business information that derives its value from secrecy. Trade secrets can be very valuable to you whether you have developed new technology, designed original products created the perfect recipe. A Trade secret is an information that is useful in the industry and that is kept confidential. It is information that imparts value to its holder and one that provides a competitive edge over its competitors. Should information that constitutes a trade secret be leaked, it could have a major negative effect on the business.
Article 39 of the TRIPS Agreement, provides that member states shall protect “undisclosed information” against the unauthorized use “in a manner contrary to honest commercial practices” as long as the information is:
- a secret in a sense that it is not generally known among or readily accessible to persons that generally deal with the type of information;
- has commercial value because it is secret; and
- has been subject to reasonable steps by the person in control of the information to keep it a secret.
This is the general guideline for determining whether the information is a secret and if it can be protected as a ‘trade secret’. Member countries may have identified more criteria but Article 39, serves as a basis for the member states of the TRIPS Agreement.
How is Tradesecrets Protected?
A Tradescret owner should employ as many precautions as reasonably possible such as:
- Restricting access to confidential information physically and electronically to only those individuals that need to know the information.
- Marking document that they constitute confidential information
- Making use of non-disclosure and confidentiality agreement
- maintaining information with the password protection
- disposing of confidential information by shredding or other means designed to destroy the information
- Conducting exit interviews with departing employees to ensure the return of all confidential information in the employees’ possession and to emphasize confidential obligation
- ensuring that there is restraint of trade provision in an employment contract
- establishing due diligence and ongoing third-party management procedure
- instituting and information protection team
- make trade secret protection a priority
It is important to note that confidential information not classified as a trade secret may be used by an employee for his own benefit or for the benefit of others after termination of his employment to the extent that it was not copied or deliberately memorized for use after the employment contract. In this case, the applicant sought to interdict an ex-employee from joining a competitor on the basis that the respondent would unlawfully make use of the applicant’s trade secrets. The court held that the applicant had failed to prove that any of the information was confidential.
When Trade secrets are exposed, what would you do?
In the event when it becomes apparent that tradesecrets have been exposed, the trade secret owner can approach the court to claim against the infringer on the basis of breach of control which allows the wronged party could claim for damages form the infringer for breaching confidentiallity agreement or based on unlawful competition which allows the wronged party to claim for an interdict in order to refrain the infringer from continuing the unlawful act. Proving damages can prove to be quite difficult. Below are different options that can be exercised in quantifying the economic harm in missappropriated trade secret.
- Lost Profit and Unjust enrichment calculations: This involves determining how much more increased sale the company would have made had the tradesecret not been revealed.
- Reasonable royalty: This remedy is suitable where it would be difficult to prove the extent of patrimonial loss. This is determined by recovering the reasonable royalty thta would have been paid by a licensee.
- Transaction specific reasonable royalty: relates to the royalty that would have been paid for a specific product or service.
How are Tradesecrets used?
- Ensure and invention or design is not disclosed to the public before applying for a patent or an industrial design: To obtain a patent for an invention, the invention must be new to the world and not known to the public. Similarly, industrial design can only be registered if they are original in the world and aren’t known to the public. This can be difficult for inventors and designers especially when trying to commercialize products, test products, launch a business, find financing or seek the partner because they usually have to disclose the invention to other people. To ensure confidentiality prior to patent prosecution, inventors will guard their new invention as trade secrets.
- Protect an Invention through means other than patent prosecution: Because securing a patent can be costly and time-consuming, some inventors and businesses choose to rely on trade secret instead. This strategy is often used when the invention has a short lifespan or when the invention is difficult to reverse engineer.
- Protect valuable businesses information that is not formally protected through another intellectual property right: Businesses that have wealth of consumer data, recipes for the food product or cutting-edge market research and analysis want to ensure that competitors do not get their hand on that information. This type of confidential information is generally not protected by patents, trademarks or industrial design or copyright. To protect this confidential information trade secret is used.
How long does a Trade secret last?
Trade secrets can potentially last forever provided the information actually remains a secret. Once the secret is out the business value are usually lost and the trade secret protection ends.
How do you keep your Tradesecrets Secret?
There are numerous ways to keep your Tradesecret secret:
- Non-Disclosure or Confidentiality agreement: When disclosing your business information to anyone, have them sign a non-disclosure agreement.
- Confidentiality Clause: Include confidentiality clauses in employment ageements.
- Encryption: Encrypt any valuable business information
- Password protection: Use password to access valuable business information
- Lock and Key: Lock up any business information in a safe
Remember, once your secret is out, it is impossible to make it secret again. The list above includes only a few ways to keep information secret. It is in your best interest to use all methods possible to ensure your secrets stay secret.