Trade secrets are any important details about a business's procedures or activities that are guarded and kept secret from the general public. They are actively protected by the corporation, and only a select few people have access to them. They have the potential to be licensed or sold for profit as a result.
The intellectual property rights on the private information that businesses post include trade secrets. These comprise information about the company's processes or operations, research and development data, etc. Since there are general protections for confidential information and against unfair competition, the theft of trade secrets is a part of unfair practices. Only after carefully examining the specifics of each case can the law decide whether or not trade secret protection has been violated.
A piece of information must have the following qualities in order to qualify as a trade secret:
● People outside of the company are unaware of it, despite the fact that it ought to have commercial value.
● Only a small number of people are authorized to be aware of it.
● The relevant body uses non-disclosure agreements and other confidentiality agreements with business partners and staff members as appropriate measures to keep the information secret.
Companies and corporations use a variety of strategies to preserve sensitive information that could be used against them if it were to leave the organization. Companies that do this include those that require employees to sign NDAs.
Information that is both technical and commercial is contained in a trade secret. Technical information contains understanding of the production procedures used to create a product, the findings of tests conducted in the pharmaceutical industry, drawings, designs, prototypes, formulas, relevant information regarding computer programs, etc. Commercial information secrets include information on supply chains, business management strategies, supplier directories, key client lists, and other advertising tactics. In addition to the categories listed above, data can also comprise formulas, food industry recipes, source codes, and protected financial information.
Trade secrets are uniformly protected against unfair competition by all members of the WTO (World Trade Organization) under TRIPS (Trade-Related Aspects of Intellectual Property Rights). In addition, state laws in the US provide protection for trade secrets. Even if the laws and severity differ from state to state, every state has protections against the theft of trade secrets. One such law that provides consistency across the board is the Uniform Trade Secrets Act (1985). All states except Massachusetts, Texas, and New York have accepted the law. Trade secrets, misappropriation, and remedies (injunctive relief, damage relief, and, in some circumstances, attorney's fees) are all defined in the act.
A trade secret must have the following qualities, per the act:
● Independent economic value, and other people may be able to receive the same economic value through their usage or disclosure.
● Typically unknown to the general public and unable to be quickly determined using appropriate methods.
The simple act of copying an unpatented item is not unlawful, according to Section 1(4) of the Uniform Trade Secrets Statute of 1985, hence responsibility must exist under this act for it to be enforced. According to Section 1(4), the acquisition, disclosure to others, or use of the secret must all have been improper (2).
According to the act, only the person whose knowledge or information was misappropriated is entitled to a legal remedy when many people are entitled to protection for the same knowledge or information. The act also honours reasonable efforts made to protect intellectual property and stop infringement.
An idea, a product, or a methodology that gives an original and cutting-edge technical solution to a challenge or introduces a novel method of doing something in general is issued or awarded a patent.
The following characteristics set a trade secret apart from a patent:
● It's necessary to disclose details about the invention when applying for a patent. The general public can utilize the invention more easily thanks to this disclosure.
● Following statutory standards, the patent and Trademark Office (PTO) often awards patents. Client and customer lists that are unique to the company are examples of trade secrets that fall outside the scope of patents.
● When compared to patent protection, which necessitates filing and adherence to industry standards, the corporation can easily safeguard trade secrets. Furthermore, protection is not assured by the simple filing of patents.
● Patents are not universal, have a narrow scope, and are only subject to temporary territorial protection. Secrets, on the other hand, do not pass the test of time (unless specific exemptions are present).
● An application for a patent is expensive and time-consuming.
EXAMPLES
● Colonel Sanders originally kept the formula's secret components in his brain. He eventually recorded the recipe, and the handwritten version is now kept in a safe in Kentucky.
The recipe is only known by a restricted group of employees who have signed a confidentiality agreement. Two different businesses combine a portion of the herb and spice mixture for increased protection. Before it is sent to the restaurants, it is automatically treated to standardize the blending. There are whispers that the top-secret recipe has additional prerequisites. One claims that the recipe is temporarily relocated to a secure place in an armored car accompanied by a high-security motorcade when KFC improves its security systems.
● Instead of patenting the recipe, which would have revealed the contents, Coca-Cola decided to make it a trade secret.
Coca-Cola made the decision to maintain the recipe's confidentiality because one of those ingredients might have been cocaine. This exclusive information has generated its own rumors. One is that insects or bugs are present in the recipe. Another is that only two people know the combination to the safe where the recipe is kept, or that each of the two employees only knows half of the secret. For the record, corporate espionage is a genuine thing. The recipe was stolen in 2006 by a worker and two accomplices, who then attempted to sell it to Pepsi. Pepsi raised the alarm and informed Coke management of the situation.
● The most prominent book list in the nation is maintained by The New York Times, which won't disclose what it considers to be a bestseller.
Since a book that has sold fewer copies than another might appear on the list but the better-selling book cannot, it appears that it is not only the quantity of volumes sold that matters. The Times is known to obtain data on sales figures from chain retailers, independent bookstores, and wholesalers, but that is the extent of our knowledge. The Times won't divulge the details of its method out of concern that publishers may exploit them to skew sales figures in their favor. When questioned, staff members give a non-answer, stating that there are "official" and "unofficial" greatest sellers.
● One such trade secret employed in law schools is Listerine. The creator granted Lambert Pharmaceuticals a license to use the top-secret recipe.
For more than 70 years, Lambert (now Pfizer) paid royalties to the inventor's family despite the fact that the formula was made public at that time. After spending over $22 million on a formula that was no longer a secret, Pfizer attempted to halt payments. It filed a lawsuit, claiming that it was no longer liable for licensing fees. Given that Pfizer had obtained the formula when it was still a trade secret and benefited from its competitive advantage, the court determined that the contract did not provide that payments might be halted in the event that the trade secret was properly discovered by others.
● WD-40 was initially created to stop rusting. The chemist kept the recipe a secret and eventually sold it.
It continues to be the sole offering of the business. Like Coca-Cola, the secret recipe has never been patented, making it impossible for rivals to figure out what is in it. The manufacturer does make clear what is NOT in the formula, including the claim that there are no known substances that cause cancer. The recipe has been kept in a bank vault for years; it has only ever been removed to switch banks and once to be carried by the CEO of the business to mark its 50th anniversary. The CEO mounted a horse while donning armor. Before being handed to the industrial partners, the recipe is combined in three cities throughout the world.
● Instead of being a marketing gimmick, the manufacturer of Twinkies keeps the recipe a trade secret out of concern that consumers won't know what the actual contents are and cease consuming or giving them to children.
Despite having chemical names that may sound dangerous to people outside the food industry, many of the constituents are safe.
● Despite being a trade secret for 70 years, the Krispy Kreme doughnut formula is not truly the source of competitive advantage. The recipe is still sealed in a safe at the company's headquarters and only a select few personnel have access to it. The method used to make Krispy Kreme doughnuts is the fundamental key to its flavor. The procedure was created by the business so that the warm, fluffy doughnuts could be sold right away after they were manufactured.
● The recipe for the unique sauce was a trade secret so closely guarded that it was forgotten during the 1980s reformulation.
It wasn't discovered missing until a manager wanted the original back. Fortunately, the recipe was still in the records, and McDonald's was able to obtain it from the individual or business that created the sauce initially.
Generally speaking, a trade secret is any private information that gives a company a competitive advantage. Such information may not be used without authorization, which is against trade secret law and considered an unfair business activity. Trade secret protection is a part of the overall idea of protection against unfair competition in the majority of legal systems around the world. Manufacturing, industrial, and business secrets are all examples of trade secrets. The topic of trade secrets is typically defined broadly and may encompass production procedures, delivery systems, marketing plans, sales techniques, consumer profiles, and lists of suppliers and customers.
This article is written by Aparna Tripathy of Symbiosis Law School Pune.