Talkin’ about trade secrets! While other forms of protection such as patents, copyrights, and trademarks require upfront costs and disclosure of some sort, trade secrets do not. In this article we will examine a few of the benefits that trade secret protection offers.
Benefit One – Trade Secrets Protect Information That Other Forms of IP Protection Do Not
Example: The (secret) recipe for KFC Fried Chicken
Arguably, the secret recipe is the most valuable piece of information KCF has…but how should the company protect it? Copyrights are not appropriate because a recipe (i,e, a list of ingredients and their corresponding quantities) is not a “literary expression.” (In other words, a recipe is not creative enough to be copyrighted). Trademarks are not appropriate because, of course, a recipe is not a brand name, slogan, or logo. Moreover, KFC wouldn’t want to advertise with its secret recipe. In the same vein, a patent is (almost ) never appropriate because it requires disclosure (not good for a secret recipe) and requires substantial costs and other upfront hurdles which often make applying for a patent cost prohibitive. Therefore, to protect a recipe, a trade secret is probably KFC’s best option.
Unlike all the above referenced forms of IP protection, a trade secret can be almost any piece of information that derives value for a company, by and because, it is kept secret. Under Wis. Stat. Sec. 134.90(c) a “trade secret” is defined as: “information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply: 1) The information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; 2) The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.
In our example, the KFC recipe fits the bill perfectly for trade secret protection. It absolutely “derives independent economic value” from not being generally known (we go to KFC because we love the taste of its (secret) chicken! If we knew how to make it, wouldn’t we just stay home?) and 2) KFC attempts to keep the recipe secret.
This isn’t to say that trade secrets can protect anything of value to a company, but they can cover many items other forms of IP protection cannot.
Benefit Two – Trade Secret Protection is Cheap and Disclosure Is Not Required
There are no upfront registration costs associated with achieving trade secret protection – unlike patents, trademarks and copyrights. Moreover, there are no disclosure requirements (…because its a secret after all).
However, KFC must take steps to keep the realm of individuals who know the trade secret — small. Additionally, all those who know the trade secret, MUST sign agreements stating they will not disclose it. As time goes on, ensuring the trade secret, stays secret, becomes more important and more difficult. Unfortunately, although trade secret protection is easy to obtain, it is also easy to lose. Once the recipe is no longer secret (i.e. a new employee doesn’t sign that NDA – and then discloses) trade secret protection is gone forever.
Benefit Three- Trade Secrets Can Last Forever
Keep the trade secret, secret, and the protection can last forever – there are no time limits.
Trade secrets are a great tool to protect information that is valuable, but doesn’t quite fit into another form of IP protection. However, while trade secret protection is easy to obtain, it is also easy to lose. Moreover, it does not protect against a competitor reverse engineering a trade secret and figuring it out on their own through proper means. In other words, if a third party buys a bucket of KFC chicken and miraculously figures out how to make the secret seasoning, trade secret protection will offer no protection at all. For that reason, trade secrets are most utilized to ensure employees and contractors cannot take trade secrets and become competitors later.
Thanks for reading.
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