What is a trade secret?
For information to be considered a trade secret, it generally must:
- Have commercial value because it is secret,
- Be known only by a limited number of people, and
- Be subject to reasonable measures to maintain its secrecy by the person who lawfully controls it, including the use of confidentiality agreements with partners and employees.
Historical Background
Before the Industrial Era, innovative artisans jealously guarded their “trade tricks” within small family workshops. However, with the Industrial Revolution, a legal system became necessary to oblige employees to honor confidentiality regarding a particular process or piece of machinery.
Famous Trade Secrets
Some of the most famous and well-guarded trade secrets in the world include:
- Google’s algorithm
- Coca-Cola’s formula
- Kentucky Fried Chicken (KFC) recipe
Scope of Trade Secrets
Trade secrets cover both technical and commercial information, such as:
- Manufacturing methods
- Pharmaceutical test data
- Software designs and drawings
- Business and financial information
- Distribution and manufacturing methods
- Supplier and customer lists
- Advertising strategies
It is important to note that a trade secret can also be a combination of elements that are publicly available individually but, when combined and kept secret, provide a competitive advantage.
Trade Secrets vs. Other Intellectual Property Rights
Unlike other intellectual property (IP) rights, trade secrets:
- Can protect a much broader range of information
- Do not have a set protection period
- Are not exclusive rights like patents (meaning they cannot be enforced against someone who independently discovers the secret)
However, legal action can be taken against any unlawful acquisition or misuse of a trade secret through breach of trust or theft. The trade secret owner may seek compensation or an injunction for such misconduct.
Trade Secrets and Unfair Practices
The unauthorized acquisition, use, or disclosure of secret information contrary to honest commercial practices is considered unfair competition and a violation of trade secret protection.
Legal Framework and International Protection
Trade secret protection, like other forms of intellectual property, is governed by national legal systems. However, in 1995, international standards for trade secret protection (“undisclosed information”) were established under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).
- Article 39 of the TRIPS Agreement requires member states to protect “undisclosed information” from unauthorized use in a manner contrary to honest commercial practices (including contract breaches, trust violations, and unfair competition).
- The information must not be generally known or easily accessible, must have value due to its secrecy, and must be subject to “reasonable measures” to maintain secrecy.
- This general formula for trade secret laws has been adopted by more than 100 of the 159 World Trade Organization (WTO) members.
Articles 42 to 49 of the TRIPS Agreement cover enforcement procedures, including judicial measures to enforce all IP rights and protect confidential information from disclosure. However, since national judicial systems vary significantly, the enforcement of trade secret rights differs from case to case.
Written by: Didier Alemán
