14 August 2023 • 3 min read
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It's no secret that some of the biggest brands in the world are incredibly protective of their trade secrets.
Businesses like Coca-Cola and KFC go to great lengths to guard the formula or recipe that sets their product apart from other competitors. And as a business owner, you could take a leaf out of their playbook and learn how to secure your trade secrets.
Coca-Cola has hidden the original formula in a heavily guarded vault; no kidding! And rumor has it that only two senior directors know the formula at any time and never travel together.
Maybe that's a bit extreme, but then again, the company is worth $277 billion. And that formula is the foundation of their empire.
This speaks volumes about trade secrets and why it's vital to protect them.
According to the Uniform Trade Secrets Act, a trade secret "means information, including a formula, pattern, compilation, program device, method, technique, or process, that:
(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."
A trade secret owner may take this route rather than get a patent. This is because to get a patent from the US Patent and Trademark Office (USPTO), the application will have to fully disclose the information that is to be protected. If you don't want this information to get out, opting for trade secret protection would be better.
So how can you secure and protect the trade secrets of your small business?
Some of the world's most famous brands, from Google to Listerine, go to great lengths to protect their trade secrets.
KFC's "Secret Recipe of 11 Herbs and Spices," which was handwritten by Colonel Harland Sanders, is locked up in a safe in Louisville, Kentucky. For further protection, two companies blend parts of the mix, so neither has the entire recipe.
And it's justified because competitors can go to great lengths to get their hands on a trade secret.
They poach employees, pay bribes, and sometimes even resort to espionage.
Roald Dahl's famous "Charlie and the Chocolate Factory" was based on such a rivalry. Cadbury and Rowntree, two prominent British candy firms, often sent spies to each other. This feud became notorious during Dahl's childhood and inspired his classic.
Now, these drastic measures are seldom called for. But you'll need to take "reasonable steps of protection." You can take practical measures like adding strong password protection to your devices. Or you could start locking cabinets with documents and proprietary information about your IP.
Since a trade secret isn't registered, it can't get the usual protections that your other IP can, with trademarks, copyrights, and patents.
But you can protect your trade secret legally with the help of nondisclosure agreements (NDAs). Employees who work with trade secret-related information can sign NDAs. These legally prohibit current and former employees from divulging trade secrets to other parties.
While trade secret law isn't very specific, you can create an NDA to suit the needs of your business.
Discussing and signing these during entry or exit interviews is an effective way of ensuring your employees understand the value of your company's trade secrets.
Given how much of a business's online transactions, robust cyber security is necessary to protect your trade secret. Especially as your business grows, trade secret information becomes harder to protect.
More employees, a broader scope for communications and transactions, and a necessary online presence make it challenging to protect trade secrets.
For this, you could establish a solid in-house IT team. This can manage the flow of information and respond to any cyber threats of trade secret theft.
A trade secret is an essential part of your intellectual property. You can also give it extra layers of protection by registering it as an IP asset, like a trademark, copyright, or patent. We recommend reaching out to a trademark attorney to explore your options.
Your trade secret could be the foundation for a successful business. As your business becomes more successful, your trade secret becomes more valuable. That's why you should have a practical and scalable strategy to protect your trade secrets as much as possible.
To qualify as a trade secret, a piece of information should meet at least the following criteria:
Information generally known to the public or competitors is not considered a trade secret. The "secret" is a necessary component. If such information does become public, the only way to protect it is by registering a trademark, copyright, or patent.
The US government doesn't have a central agency dedicated to enforcing trade secrets. In most states, trade secrets are enforced due to an infringement or misappropriation lawsuit.
But trade secrets can be protected with a combination of state and federal laws. There are civil and criminal penalties attached to "misappropriation," which cover unauthorized acquisition, disclosure, or use of a trade secret.
A trade secret can be protected for an indefinite duration of time. But that is, unless it's legally acquired or discovered by other people or the larger public in any other way.
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Amrusha is a versatile professional with over 12 years of experience in journalism, broadcast news production, and media consulting. Her impressive career includes collaborating extensively with prominent global enterprises. She garnered recognition for her exceptional work in producing acclaimed shows for Bloomberg, a renowned business news network. Notably, these shows have been incorporated into the esteemed curriculum of Harvard Business School. Amrusha's expertise also encompassed a 4-year tenure as a consultant at Omidyar Network, a leading global impact investing firm. In addition, she played a pivotal role in the launch and content strategy management of the startup Live History India.
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