Who Owns Trade Secret: Everything You Need to Know
Generally, all confidential business information that provides a competitive edge to enterprises can be considered trade secrets.3 min read
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.
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.
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- Patent applications that are unpublished and/or pending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.
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.
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.
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.
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.
If you need help with determining who owns trade secret, you can post your legal need on the UpCounsel marketplace. UpCounsel accepts only the top five percent of lawyers on its site. Lawyers on UpCounsel's marketplace come from schools such as Yale Law or Harvard Law and usually average 14 years of legal experience, including work with or on behalf of companies like Stripe, Google and Twilio.