What is a trade secret?
Trade secrets are intellectual property (IP) rights on confidential information which may be sold or licensed.
In general, to qualify as a trade secret, the information must be:
- commercially valuable because it is secret,
- be known only to a limited group of persons, and
- be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.
The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.
In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret. Trade secrets encompass both technical information, such as information concerning manufacturing processes, pharmaceutical test data, designs and drawings of computer programs, and commercial information, such as distribution methods, list of suppliers and clients, and advertising strategies.
A trade secret may be also made up of a combination of elements, each of which by itself is in the public domain, but where the combination, which is kept secret, provides a competitive advantage.
Other examples of information that may be protected by trade secrets include financial information, formulas and recipes and source codes.
Depending on the legal system, the legal protection of trade secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.
While a final determination of whether trade secret protection is violated or not depends on the circumstances of each individual case, in general, unfair practices in respect of secret information include industrial or commercial espionage, breach of contract and breach of confidence.
A trade secret owner, however, cannot stop others from using the same technical or commercial information, if they acquired or developed such information independently by themselves through their own R&D, reverse engineering or marketing analysis, etc. Since trade secrets are not made public, unlike patents, they do not provide “defensive” protection, as being prior art. For example, if a specific process of producing Compound X has been protected by a trade secret, someone else can obtain a patent or a utility model on the same invention, if the inventor arrived at that invention independently.
Software algorithms, formulas, recipes, manufacturing processes, lists of clients and business plans, can all be protected by law, but only if you can prove you gain economic value from them and that you have taken steps to preserve their confidentiality and prevent misuse or misappropriation. It is difficult for the owner of a trade secret to seek an injunction or claim damages: how can you prove that you possessed and used a trade secret at a certain point in time, if you always kept it secret?
You can solve this problem with WIPO PROOF . It not only provides evidence that you possessed a trade secret at a given point in time, it can also discourage possible theft or misuse by signaling to partners and employees that protective measures are in place.
Read the full list of trade secrets FAQs.
Video: What is a trade secret?
Video: Get confidential and certified proof of existence for your trade secrets
Trade secrets in action
Trade secrets are a key component of IP portfolios helping businesses protect their secret formulas, know-how and other key information that gives them a competitive edge.
With its main IP being nearly two hundred years old, Angostura Limited from Trinidad and Tobago has found that the best way to protect its product is through using trade secrets.
Although patents are the primary tool with which Thailand's National Science and Technology Development Agency protects its innovations, at times trade secrets are necessary, in particular for the protection of know-how.
American software company Tiatros Inc. protects its know-how and trade secrets to ensure its competitiveness.
Laws and treaties
The Paris Convention for the Protection of Industrial Property (Paris Convention) administered by WIPO deals partly with the protection of trade secrets as does the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
IP laws and treaties (WIPO Lex)
The WIPO Lex database is a comprehensive search tool that allows you to search national laws and international treaties on intellectual property.
WIPO Symposium on Trade Secrets and Innovation (November 2019) – Exchanging ideas and perspectives on issues relating to the interface between trade secrets and innovation.