Trade secrets – the black sheep in the IP family

Trade secrets are a subcategory of confidential information. They are often thought of as a type intellectual property, although technically there is no ‘property’ in information. Neither the English common law doctrine of breach of confidence / misuse of confidential information, nor the Trade Secrets (Enforcement, etc.) Regulations 2018 which partially implement the Trade Secrets Directive in the UK, create a proprietary species of intellectual property right. In short, the legal regulation of trade secrets, and confidential information generally, is all about ‘control’ (rather than ‘ownership’) of information.

Why does it matter?

It matters because with other types of intellectual property (e.g. patents, registered designs, trade marks and copyright), once the ‘ownership’ of the right has been secured (usually by filing an application for registration or by putting a contract in place), disclosure of the information relating to the invention, design, trade mark or creative work is not problematic (i.e. because ‘ownership’ facilitates ‘control’).

With trade secrets, it’s different. Because exercising ‘ownership’ over pure information is difficult (if not impossible), the next best thing is to exercise ‘control’ over such information be maintaining its confidentiality.

The best way to exercise control over trade secrets and other valuable confidential information is to ensure that robust contracts are in place with all stakeholders who are involved in the creation, development or use of such information

For example, executive service agreements should be in place with all senior management, employment agreements should be in place with all employees, freelancer agreements should be in place with all independent contractors, non-disclosure agreements should be in place with everyone else etc. It may also be advisable to have a company ‘IP Policy’ which sets out what the company regards as protected (to avoid any dispute later regarding what does and does not constitute ‘intellectual property’ or ‘confidential information’).

There are many examples of the law governing trade secrets and other confidential information providing powerful protection for pure information (e.g. the secret recipe for Coca Cola and Google’s secret algorithm for its search engine). It is also worth remembering that, to be protected, confidential information need not be a ground-breaking recipe or algorithm. More generic (even seemingly mundane) confidential information may also be valuable and protectable, such as client lists, supplier lists, financial projections, training methodologies, strategic plans for the business relating to things like advertising, marketing, business development, training, professional development, technological innovation, market expansion etc., as well as secret processes, methodologies and know-how that are internal to the business

There are also many advantages that trade secrets have over, for example, patents. First, there is no registration process involved in securing a trade secret, so the process need not be lengthy or expensive. The key requirement is that confidentiality must be maintained (as above, robust contracts are key). Second, there is no requirement to ever disclose the trade secret to the public, whereas with patents the details of the invention must be disclosed to the public and the patent protection expires after 20 years. Third, there are no novelty or inventiveness requirements as there are with patents. Finally, territoriality is not an issue as it is with patents. As long as the confidentiality of the trade secret is maintained, it is possible potentially to maintain global protection for the trade secret indefinitely.

Last word: The world has been turned upside-down in 2020. More and more business are utilising technology to facilitate the exchange of information whilst people work remotely. More and more employees and contractors are working on their own devices and IT systems because they are away from their normal places of work. More and more business are exploring new ways to innovate and adapt at a time when the world desperately needs innovation and flexibility. All of this means that new and valuable information is being created and developed every day. It also means that new and valuable information is being lost, or at risk of being lost, every day. Meet this challenge of ‘information leakage’ now by: (a) identifying the valuable confidential information that might exist in your business; (b) identifying all the stakeholders in your business who are involved in its creation or development, or who have access to it, and (c) taking steps to protect it by putting robust contracts in place.

Briffa are experts in all aspects of IP law and practice and pride ourselves on providing practical, commercially legally sound advice to our clients. If you would like to arrange a free call/meeting with one of our lawyers, please get in touch.

Written by Éamon Chawke, Partner