Trade Secrets: Meaning and Protection


Types of trade secrets:

Trade secrets include any business information having commercial value and is unknown to others. Trade secret consists of formulas, processes, designs,?patterns or compilations of information that possess inherent economic value. One of the most famous examples of trade secret is the Coca Cola formula.

In order to qualify as a trade secret, following conditions should be met:

  • (i)It should possess inherent economic value,
  • (ii)It should be unknown to others,
  • (iii)Reasonable steps should be taken?by the holder of the information to keep it secret.

An unauthorized acquisition, use or disclosure of secret information by others in a manner contrary to honest commercial practices is regarded as an unfair trade practice as well as violation of trade secret protection.

Types of trade secrets:

Trade secrets include technical information, commercial information, financial information, formulas, recipes and source codes. Other information that may be protected by trade secret is a combination of elements, where the combination is kept secret which provides a competitive advantage.

Protection offered by a trade secret:

Trade secrets offer protection against unfair competition?or protection of?confidential information. However, owner of a trade secret cannot stop others from using the same technical or commercial information, if they acquire or develop such information independently. Further, unlike patents, trade secrets do not provide defensive protection. Trade secrets may last forever provided the information remains a secret and the protection ends as soon as the secret is out.

How can a trade secret be protected:

Trade secrets owners should take precautionary measures to protect their trade secrets against theft or misappropriation. There are numerous ways to keep the business information a secret, which may include the following:

  • The owners of trade secret should sign a Non-Disclosure Agreement or confidentiality agreement that help in preventing disclosing of confidential information.
  • Trade secret owners should include confidentiality clauses in employment agreements.
  • Any valuable business information should be encrypted.
  • Robust IT security infrastructure should be made.
  • Accessibility of valuable business information should be kept under control.