TRADE SECRETS
In the fiercely competitive landscape of modern business, the power of information cannot be overstated. Trade secrets, the invisible yet invaluable assets of a company, often constitute the lifeblood of businesses, fuelling innovation and maintaining competitive edges. Unlike patents or copyrights, trade secrets are not protected by filing at an intellectual property office. Instead, their power and value are maintained through secrecy.
Understanding trade secrets
A trade secret can be any valuable piece of information that is:
1. Not generally known or readily accessible to the relevant business circles or the public.
2. Confers some sort of business benefit or commercial value on its holder due to its secrecy.
3. Subject to reasonable steps to keep it secret taken by the holder.
Examples of trade secrets include formulas, practices, processes, designs, instruments, patterns, or compilations of information. One of the most famous examples is the secret recipe for Coca-Cola, closely guarded for over a century.
The importance of protecting trade secrets
The protection of trade secrets is not just about safeguarding a company’s current operational strategies; it is also about securing its future. The unauthorized disclosure of a trade secret can lead to loss of competitive advantage, erosion of customer trust, and ultimately, financial ruin. Unlike other forms of intellectual property, the protection of trade secrets has immediate effect as there is no examination procedure and there is no cost for protection. Moreover, trade secrets do not expire, meaning their protection could, in theory, be perpetual, offering a long-term competitive edge, as long as the information is kept confidential and protected.
Practical steps to protect trade secrets
Practical Steps to Protect Trade Secrets Protecting trade secrets requires a proactive and multifaceted approach. Here are some essential steps companies should consider:
1. Employee Education: Employees should be educated about the importance of trade secrets and the company’s policy regarding them. Their employment agreements should include language about the need to maintain internal company information confidential. Senior employees and those in specialised jobs may also be required to sign a non-compete agreement to restrict them from working with competitors if they leave the company.
2. Identifying trade secrets: a system for classifying and documenting information that is critical to the success, competitiveness, or innovation of the business must be established to clearly identify the trade secrets.
3. Non-Disclosure Agreements (NDAs) NDAs are a must when exchanging information with business partners and anyone who has access to the company’s confidential information. More details about NDAs are available here.
4. Implementing Access Controls: Limit access to trade secrets to only those who need to know. Use physical and digital security measures to safeguard information. The implementation should be constantly monitored to follow up on indications that unauthorised persons wish to obtain access to the trade secrets.
5. Regular Audits Conduct regular audits of how trade secrets are stored and accessed. Update security protocols and access controls as needed.
6. Legal Measures in Case of Breach Have a clear legal strategy in place in case of a breach of trade secrets. This includes understanding the legal framework and having lawyers familiar with your technology and business.
7. Exit Interviews for Employees When employees leave the company, conduct exit interviews to remind them of their confidentiality obligations.
Consequences if Trade Secrets are disclosed
Depending on the jurisdiction, the employer will have claims against the employees. In Germany, the protection of trade secrets is codified in the Act on Protection of Trade Secrets (Gesetz zum Schutz von Geschäftsgeheimnissen (GeschGehG)). Under certain circumstances, disclosing trade secrets can even be punishable under criminal law.
In conclusion, trade secrets are a critical component of a company’s intellectual property portfolio. Protecting these assets requires a strategic blend of legal, technical, and human resource measures.
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