Key Takeaways

  • To define proprietary is to describe ownership and the rights associated with it, especially over information or processes.
  • Proprietary information can include anything from trade secrets and client lists to unique manufacturing processes and software code.
  • Protection is typically provided through intellectual property laws, including patents, copyrights, trademarks, and NDAs.
  • Businesses must treat such information as confidential and take reasonable steps to ensure it remains protected.
  • Proprietary trading refers to financial institutions investing their own funds rather than clients’, highlighting another form of proprietary use.

What is proprietary relates to ownership and the rights an owner may exercise in regards to his or her property or information. A proprietor is one that possesses, owns, or holds exclusive right to something.

Legally, what is proprietary often refers to proprietary information. Proprietary information is important, possibly sensitive information that a company owns. This information usually gives the company competitive advantage(s) in its market.

Things that can be used, known, produced, manufactured and/or marketed under the exclusive legal right of the inventor or maker may be proprietary. For example, a patented medicine is protected by intellectual property law against free market competition in regards to name, product, composition, or process of manufacture. If a manufacturer uses a particular manufacturing process that others do not know about (trade secret protection) or are forbidden to use (patent protection) then that is a proprietary process. A proprietary trademark is a name or logo that only the owner of that trademark can use.

If a business was in fact owned by and managed by an intelligence organization as a front, that would be proprietary to the intelligence organization.

Intellectual Property Protection

Protection to these proprietary articles are through intellectual property law: copyright, patents, trademark, etc. Unfortunately, however, at some time down the line, proprietary items and processes will lose their legal protection. This is when the information becomes a part of the public domain. Once that happens, anyone can use the item, process, or trademark as they see fit.

Baseball fans have proprietary attitudes toward their favorite team. When their team wins they say “we won,” not “they won,” as if they own or are part of the team.

Municipal corporations must act in the best interests of the citizens. This is a proprietary function. This proprietary function is different than its governmental functions, which are duties drawn from being a political part of a state.

Proprietary information is very important for the success of most businesses. This property may not be valued, but it is very valuable. Especially due to the marketplace and its competitive nature. Intellectual assets are highly sought-after commodities.

Because of the value and importance of such property, companies often prohibit directors, employees, and agents from disclosing confidential or proprietary information without proper authority in non-disclosure agreements/clauses. Sometimes this prohibition extends to after the employment relationship has ended.

If a contractor is hired and received proprietary information in order to do his or her work, a company often requires him/her to give back the information or property and to keep the information confidential.

What Proprietary Means in Business and Law

In both legal and business contexts, the term proprietary refers to ownership and the exclusive rights that come with it. The proprietary nature of something means it is controlled or owned by a specific person or entity and is not available for general use without permission. This concept applies not only to physical property but also to intangible assets like knowledge, designs, and processes.

For example, a company may hold proprietary rights over software it developed in-house, giving it the exclusive authority to use, license, or sell the product. Similarly, a unique customer database or marketing strategy may be deemed proprietary if it confers a competitive advantage and is kept confidential.

In legal terms, proprietary rights include the authority to exclude others from using or reproducing something owned, whether that's a patented invention or a copyrighted design. The stronger the proprietary protection, the harder it is for competitors to replicate or benefit from the owner's innovation.

Proprietary Information Can Include:

  1. Trade secrets
  2. Formulas
  3. Recipes
  4. Processes
  5. Production methods
  6. Marketing strategies
  7. Salary structure
  8. Consumer contact information
  9. Past and present contracts
  10. Computer software
  11. Technology/hardware
  12. Employee knowledge
  13. Employee skill
  14. Financial data
  15. Test results

For information to be considered proprietary by a court, a company must treat the information as confidential. Courts will not find readily available information or public information proprietary. The information must also give the company a competitive advantage to be considered proprietary.

If the information is known to others outside of the company, then it will not give the company advantage. In order to be granted protection by a court, a company must also prove that it has taken “reasonable steps” to keep the information secret.

Courts do not require that companies take all possible measures to keep the information private. Courts do not require the secret to be absolutely or completely private. Reasonable steps in order to keep the information confidential must be “reasonable under the circumstances.”

A company has different ways to keep its information proprietary:

  1. Confidentiality clauses in employee contracts
  2. Nondisclosure clauses
  3. Non-compete agreements
  4. Security systems
  5. Restricting employee access with codes
  6. Data protection codes and procedures
  7. Secure phone lines
  8. Secure conference rooms

Companies should make sure that their covenants are reasonable in both time and location. Otherwise a court will not enforce them and will not restrict the unreasonable restriction of the former employee’s right to find a new job. They should also ensure that the employees that they do reveal trade secrets to have signed a confidentiality agreement of some kind or a court may not protect a trade secret of that small business.

Proprietary Trading and Financial Use

In the financial world, proprietary trading—often shortened to “prop trading”—is a practice where a firm, such as a bank or hedge fund, invests its own capital into the market to earn profits directly, rather than earning commissions by trading on behalf of clients.

This approach is considered "proprietary" because the trading strategies, data, and algorithms used are closely guarded as trade secrets. Firms engaging in prop trading have access to internal models and market research that provide a competitive edge, making this information proprietary in nature.

While lucrative, proprietary trading also comes with risks and regulatory oversight, especially after the 2008 financial crisis, leading to restrictions like the Volcker Rule under the Dodd-Frank Act, which limits the ability of banks to engage in such activities with their own funds.

Characteristics of Proprietary Rights

For a company or individual to claim something as proprietary, several criteria typically apply:

  • Exclusivity: The asset or information is under the exclusive control of the owner.
  • Confidentiality: The owner actively protects the information through measures such as NDAs, access restrictions, and physical or digital security.
  • Economic Value: The information or asset provides a competitive or commercial advantage.
  • Limited Disclosure: Proprietary material is shared only with authorized parties, and often under legal restrictions.

These characteristics help differentiate proprietary property from general knowledge or public domain content.

Common Misconceptions About Proprietary

It's important to note that not all valuable or private information qualifies as proprietary. For courts to enforce proprietary rights, the owner must show that the information is not generally known, has commercial value, and that reasonable efforts were made to keep it confidential.

Common misconceptions include:

  • "All internal business info is proprietary": Only information that meets the confidentiality and value criteria is protected.
  • "Public data can be proprietary if organized a certain way": Courts are unlikely to grant proprietary status to data that is otherwise publicly accessible, unless there’s clear value added through organization or processing.
  • "Once something is proprietary, it’s always protected": Proprietary protections can expire (e.g., patents) or be lost if confidentiality isn’t maintained.

Frequently Asked Questions

  • What does it mean when something is proprietary?
    It means that the item or information is owned and controlled by someone, giving them exclusive rights over its use, sharing, or distribution.
  • How do you define proprietary in legal terms?
    In legal contexts, proprietary refers to ownership rights that allow the holder to control, use, and protect something—often intellectual property or sensitive business information.
  • Can proprietary information be shared?
    Yes, but typically only under a nondisclosure agreement (NDA) or confidentiality clause to ensure that the information remains protected.
  • What is the difference between proprietary and confidential information?
    While all proprietary information is confidential, not all confidential information is proprietary. Proprietary implies ownership and competitive advantage, while confidential simply means it’s not publicly disclosed.
  • Is open-source software the opposite of proprietary?
    Yes, in many ways. Open-source software is freely available for anyone to use, modify, and share, while proprietary software is restricted to the owner’s control and usage terms.

If you need help with what is proprietary, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.