About trade secrets

A trade secret is the legal term for confidential business information. It can include any information that is valuable to its owner and that the latter wants to keep secret.

Trade secret may include customer lists, recipes and formulas, special processes, devices, methods, techniques, business plans, research and development information, etc.

In general, protection is sought to safeguard a trade secret from exploitation by those who obtain access through improper means or who breach an obligation of confidentiality.

Protecting a trade secret

There is no formal registration or application procedure for trade secrets. Public disclosure of a trade secret could destroy an organisation’s ability to seek damages for misappropriation or theft.

However, simply calling a piece of information a trade secret does not make it a trade secret. An organisation must behave in a way that demonstrates its desire to keep the information secret. To meet the criteria for a trade secret the information should meet the three criteria determined by law, these are:

  • The information must not be in the public domain - some legislation states that the information must not be “generally known or readily ascertainable”. If someone can learn how to make a product by simply examining it then trade secret protection does not apply.

  • The information must have an economic value that depends upon its secrecy, i.e. its economic value arises from the inaccessibility of the information to others who could obtain value from the information.

  • Lastly, the trade secret holder must use “reasonable measures under the circumstances to protect” the secrecy of the information. Apart from preventing public disclosure, those who have potential access to the secret information should acknowledge its secret nature.

These essential principles for trade secret protection are recognised by NAFTA, GATT, WTO/TRIPS and the national laws protecting trade secrecy around the world.

Rights arising from trade secret protection

The owner of a trade secret can prevent those who are obliged to keep the secret or who obtain the information via improper means from copying, using and benefiting from the trade secret or disclosing it to others without permission.

Only people who discover the secret independently, that is, without using fraudulent means or violating agreements, cannot be stopped from using the information. For example, it is not a violation of trade secret law to analyse or ‘reverse engineer‘ any lawfully obtained product and determine its trade secret.

Last update: 22 November 2012

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