Trade secrets protect business information that gives you an advantage because others do not know it. There is no registration needed for trade secrets. Protection comes from keeping the information confidential with reasonable and consistent safeguards. Even without registration, trade secrets are protected from misappropriation by strong, state and federal statutes.
What Is a Trade Secret?
A trade secret is any information that has economic value because it is not generally known or easily discovered by proper means, so long as an individual or business actively works to keep confidential. The concept is broad. A trade secret can be a formula, a process, a method, a data set, source code, a pricing model, a supplier program, a customer list with nonpublic details, or a launch plan. The common thread is that secrecy creates the advantage.
If a skilled competitor could find or build the same information quickly from public sources or simple testing, it is less likely to qualify as a trade secret. If they would need time, money, and insight to recreate it, you are on stronger ground.
Why Choose a Trade Secret Plan Rather Than a Patent?
Patents require public disclosure. Patent applications usually become available to the public about eighteen months after filing and thereafter become searchable on the United States Patent and Trademark Office website, just like patents. That openness can help with signaling and licensing, but it also teaches the world how the invention works.
Trade secret protection keeps qualifying information confidential for as long as you maintain reasonable safeguards. Choose secrecy when the advantage depends on methods or data that others cannot easily reverse engineer and that you can keep the information confidential at a reasonable cost. Many companies use both. They patent what needs to be public for strategic reasons and they use trade secret plans keep process details and data confidential.
An Example of a Strong Trade Secret Plan
Companies that protect famous recipes illustrate strong day to day discipline. An often-cited example is the KFC blend of herbs and spices. Reports describe the recipe being held in a secure vault with limited access, strict need to know rules, and vendor processes that split production so that no single outside party has the full formula. The program uses physical security, contract controls, and process design to reduce the chance that any one person or vendor could leak or reconstruct the secret. The lesson is not the famousness of the recipe. The lesson is that layered, documented controls make secrecy credible and durable.
What a Good Trade Secret Program Looks Like
A strong trade secret program is layered. It combines people controls, process controls, and technology controls. The goal is not perfection. The goal is reasonable steps that the business actually follows.
- Physically protect the information
- Do not leave confidential materials on a desk in a shared space. Lock paper files in a drawer or cabinet.
- Keep laptops and drives under lock and key. Use strong passwords on every device.
- Reasonable security is the goal. You do not need a bank vault, but you should be able to show that you kept the information secured.
- Mark and organize confidential materials
- Clearly label documents and folders as confidential or trade secret. Use protected folders for digital files and keep physical copies in labeled files.
- Only mark information that is truly confidential. Over labeling weakens your position.
- As a guide, mark items that give you an advantage, such as customer lists, blueprints, computer code, recipes or formulas, and manufacturing processes.
- Use nondisclosure agreements
- Have employees, contractors, vendors, and advisors sign NDAs before they receive confidential information.
- Early stage investors often will not sign an NDA for an introductory meeting. Share only non-confidential basics at first and use an NDA later if due diligence requires deeper access. If your information is the type that must be shared with potential investors, this might be one factor to suggest patent protection.
- Keep signed copies organized so you can prove who is bound by confidentiality.
- Share on a need to know basis
- Give each person only the specific information they need to do their job.
- Keep sensitive details compartmentalized. For example, developers do not need the sales team’s customer lists and the sales team does not need the source code.
- Maintain a need to know register that lists who has access, when they signed an NDA, what they received, and whether materials were returned at the end of the engagement.
These steps show reasonable efforts to maintain secrecy. They also make it easier to prove what is confidential, who has access, and how you protect it.
Considering Trade Secret Protection
Trade secrets let you capture value without public disclosure. Trade secret protection keeps qualifying information confidential for as long as you maintain reasonable safeguards, which may be a significant benefit for process details, data sets, and methods that competitors cannot easily discover. At Conley Rose, we help businesses protect their confidential know how and build long term value through practical trade secret programs and enforcement.