Key Takeaways

  • Trade secrets belong to companies or individuals who create, maintain, and protect them, often forming a critical part of corporate value.
  • Companies with trade secrets rely on them for competitive advantage, with examples ranging from formulas (Coca-Cola) to algorithms (Google).
  • Unauthorized use of trade secrets is considered misappropriation and can lead to lawsuits, damages, and injunctions.
  • Trade secrets can include customer lists, pricing structures, algorithms, supply chain logistics, or manufacturing processes.
  • Businesses must implement internal controls—like NDAs, restricted access, and clear documentation—to establish and defend trade secret ownership.
  • Proprietary, confidential, and trade secret information overlap, but trade secrets specifically carry economic value from secrecy.

Who owns trade secret is one question that has been asked time and again. Generally speaking, all confidential business information that provides a competitive edge to enterprises can be considered trade secrets. One of the most famous examples is Coca Cola's formula. Confidential information and trade secrets are the lifeblood of many businesses and nearly all enterprises possess them.

Unauthorized Use

One of the most visible forms of corporate intellectual properties are trademarks (which are created by common law) and copyrights and patents (which are created by federal statutes). Though these trade secrets and confidential information are usually in the shadows, they are the pillars of a business' basic infrastructure. Unauthorized use of trade secrets is a violation and regarded as an unfair practice.

Legal Remedies for Trade Secret Misappropriation

When companies with trade secrets discover unauthorized use, they can pursue remedies under state trade secret laws or the federal Defend Trade Secrets Act (DTSA). Courts may issue injunctions to stop further misuse, order the return or destruction of stolen information, and award damages for lost profits or unjust enrichment. In cases of willful misappropriation, punitive damages and attorney’s fees may also be available. Criminal penalties can apply when trade secret theft rises to the level of economic espionage. These legal tools underscore the importance of demonstrating clear ownership and active measures to keep information confidential.

Examples of Trade Secrets

Depending on the type of legal system in operation, protection of trade secrets is based in case law or specific protections regarding the protection of confidential information. It forms a major part of protection against unfair competition. Trade secrets are defined in broad terms and usually include:

  • Manufacturing processes
  • Lists of clients and suppliers
  • Advertising and marketing strategies
  • Consumer profiles
  • Distribution methods
  • Sales methods

Other examples include:

  • Engineering information; tolerances and formulas; processes, methods, and know-how
  • Financial and business information
  • Patent applications that are unpublished and/or pending
  • Computer programs (in particular, source codes) and other related information
  • Internal marketing data
  • Services or products under research and/or development
  • All databases containing information related to a company

The determination of what constitutes a trade secret is dependent on individual circumstances surrounding a case. Trade secrets include unfair practices relating to the unlawful acquisition, use, or dissemination of secret information include breach of confidence, breach of contract, and commercial espionage.

Famous Companies With Trade Secrets

Many global brands owe their success to carefully guarded secrets. Some of the most famous examples include:

  • Coca-Cola – Its secret formula, stored in a vault, has been protected for over a century.
  • KFC – The blend of 11 herbs and spices remains undisclosed, known to only a few people.
  • Google – Its search algorithm, refined continuously, gives the company a dominant market edge.
  • WD-40 – The water-displacing formula, invented in the 1950s, has never been patented to avoid disclosure.
  • Listerine – Johnson & Johnson protected its mouthwash recipe as a trade secret for decades.
  • Apple – Designs, supply chain methods, and unreleased product details are tightly controlled.
  • Mars, Inc. – The formula for M&M’s and other candies are strictly confidential.

These companies with trade secrets show how diverse industries—from food to technology—depend on secrecy as a business strategy.

Identifying Trade Secrets/Confidential Information

For information to be classified as a trade secret, it must not be known to the general public or to individuals (outside the corporate entity or business) who have knowledge about the information's subject matter. The information must be sufficient enough to confer potential or actual business or economic advantage on persons who possess the information.

How Companies Protect Trade Secrets

For companies with trade secrets, the strength of protection depends on the safeguards in place. Common measures include:

  • Employee Agreements: Non-disclosure and non-compete contracts limit information leaks.
  • Access Restrictions: Sensitive information is shared only with individuals who need it to perform their work.
  • Encryption and Digital Controls: Technology-based protections prevent unauthorized copying or transfer of data.
  • Internal Training: Employees are educated on what qualifies as a trade secret and their duty to protect it.
  • Auditing and Documentation: Companies document trade secrets to prove their existence and value in court.

The law requires that owners take “reasonable measures” to protect trade secrets. Failing to do so could weaken claims of misappropriation later.

Confidential Information

Although trade secrets are indeed confidential information, there is other business information (which are not necessarily trade secrets) but are regarded as secret and confidential within the business entity. They include physical objects, documents, categories of documents, computer programs, physical processes, methods and procedures, locations, and much more that have been designated as confidential by the company.

Proprietary Information

Though confidential information and trade secrets are classed as a company's proprietary information, other information (that are not secret), such as the subject matter of patents and copyrighted information, can also be regarded as proprietary information.

In truth, a company can view virtually everything it creates or does as proprietary, even if some of the information, processes, and methods cannot be protected under intellectual property rights. For instance, a business' philosophy towards customer management can be regarded as proprietary, although the philosophy is not protected.

Trade Secrets vs. Patents and Copyrights

Unlike patents and copyrights, which require public disclosure in exchange for legal protection, trade secrets remain valuable precisely because they are kept confidential. Companies must decide whether to patent an invention—revealing its workings but gaining exclusive rights for a limited period—or keep it a trade secret, potentially protecting it indefinitely. For example, while a patented invention may expire after 20 years, a secret recipe or algorithm can remain protected indefinitely if secrecy is preserved. Businesses often blend these strategies, patenting some innovations while keeping core processes confidential.

Different Meanings

Unfortunately, many persons and companies use “proprietary,” “confidential,” and “trade secret” interchangeably. Confidential information and trade secrets are actually subsets of the class of proprietary information. In some contexts, confidential information and trade secrets do have similar meanings but in others, they are separate concepts. On the other hand, proprietary information can be used generally.

The differences in the meaning of these terms are very important and must be duly noted. When used in contracts or agreements, a court may assume that the terms have separate meanings, even if the intent of the contracting parties was that they have interchangeable meanings.

Whenever possible, businesses should document their trade secrets, whether in electronic or paper form. However, some businesses may be unwilling to do so because they fear the omission of some important trade secrets during documentation.

A better approach may entail the identification of trade secrets and documentation of their secret status in addition to the economic value/advantage such secrets confer on the business. During litigation, a law court may require trade secret owners to identify the alleged secrets before embarking on discovery of the alleged misappropriation by the defendant.

Frequently Asked Questions

  1. Who legally owns a trade secret?
    The entity—company or individual—that develops and maintains the secret while taking reasonable measures to protect it owns the trade secret.
  2. Can an employee claim ownership of a trade secret?
    Typically no. Trade secrets created within the scope of employment usually belong to the employer, though contracts and state laws can influence ownership.
  3. Why do companies choose trade secret protection over patents?
    Trade secrets can last indefinitely if kept confidential, whereas patents expire. Secrecy is often preferred when disclosure would reduce competitive advantage.
  4. What happens if a trade secret is disclosed publicly?
    Once public, the information loses its trade secret status and cannot be reclaimed as such, though contractual remedies may still be pursued.
  5. What industries rely most on trade secrets?
    Food and beverage, technology, pharmaceuticals, and manufacturing industries are among the most dependent on trade secrets for long-term competitiveness.

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