What Is A Trade Secret?

A trade secret can be a product or a process, and is any valuable information that is kept secret. Some key traits of trade secrets are:

• Information if revealed to other businesses could detriment the entity owning the trade secret,
• The owner of the trade secret must limit the holders of the trade secret, and not allow the information to be made public
• The trade secret must be in the context of carrying out business

A trade secret is not registered with intellectual property organisations such as IP Australia, and is not made public. The only form of protection for trade secrets are by keeping them secret.

A trade secret does not have to be a unique invention or completely secret. Unlike a patent for example, a trade secret cannot stop another from independently creating the same process or product and making a profit from it.

Some examples of trade secrets include formulae or ingredients, for example KFC’s secret herbs, or the ingredients to Coca Cola. Trade secrets can also include customer lists, pricing and costing information, such as how much a manufacturer charges in the supply line.

Trade secrets must be pro-actively protected. Courts will look at several features to determine trade secrets including how well known the trade secret is outside of the entity, what action has been taken to guard the secret, how well protected the trade market is, the trade secret’s value to the entity and competitive advantage, the difficulty in creating the trade secret.

Trade secrets should also have access limited within the organisation itself. Staff should also sign confidentiality agreements or employment agreements with confidentiality clauses in them.

Protection of trade secrets is found in Chinese legislation, in the Anti-Unfair Competition Law. According to this legislation, the burden of proof lies with the alleged infringer of trade secret information rather than the business.

We’ve written more about protecting your intellectual property here.