In business, sometimes the most valuable asset an organisation has is its creative ideas, managerial processes, unique expressions and branding. These may be things that ultimately provide a business with the competitive advantage that it needs to be successful. We often refer to these things as ‘intellectual property,’ which, can be protected in many ways. Often when we think of protecting intellectual property we jump straight to considering things such as copyright, patents and trademarks. Although these can be time consuming and costly, an alternative though, can be achieved by treating this property as a trade secret.
As children, (based on my experience), as we all know the most evident proclamation of trust between friends is the willingness to share secrets, and then bind the other person to silence. This is done through the most legally enforceable, relationship binding, and absolutely unbreakable agreement, – known as a “pinkie promise.” A pinkie promise cannot be entered into lightly, it requires years of trust building and absolute commitment to the relationship. A pinkie promise should not be considered until there has been at least 8 years of friendship between the two parties (please see the disclaimer at the bottom of the page and be assured that this isn’t legal advice). They are used to hide secrets as delicate and important as which girl you think is cute and whose lunchbox you stole biscuits out of.
A trade secret in your business may be much like my friend’s secret from primary school, which was of utmost importance to them. They kept it confidential and secure and only shared it with those whom they bound to silence. Although unfortunately, a pinkie promise isn’t valid in today’s business world, we must take the necessary precautions when dealing with our own intellectual property and that of other businesses. Treating this information as trade secrets, can be an effective way of doing so.
A trade secret has three major characteristics which are:
• any information that is known or used in a business; and,
• that information is not generally or readily available to the public, particularly the business’ competitors; and,
• that information is maintained by the business confidentially and securely.
In your business, there may be things such as business and marketing plans, client lists, product designs or a recipe that can be kept as a trade secret. A very well-known trade secret is that of Coca Cola’s recipe. Coca Cola has used trade secrets to keep its formula out of the hands of the public for decades. The one downside is that trade secrets do not provide legal security against someone else inventing an identical object, idea, or in this case, flavour of bubbly beverage.
In a nutshell, a trade secret helps keep your business’ intellectual property a secret, and if it is ‘stolen’ protects you under common law.
In recent news there has been an ongoing lawsuit between two large companies – Jawbone and Fitbit – whom both produce fitness accessories. Jawbone has alleged (among other things) that Fitbit and a few of their former clients have stolen several of their trade secrets, particularly in the area of their product design. What comes of that we will soon see, although what is important now is that we don’t find ourselves and our businesses in a similar situation.
Firstly, and obviously, don’t steal from someone else. Whether it be a valuable object or some form of intellectual property, stealing is stealing.
Just as importantly, there are several ways in which you can be secure, so someone else doesn’t steal from you. For some very handy tips on how to keep your trade secrets secure, refer to our past BLOG which outlines the areas and ways security can be applied: Keeping the Cat in the Bag: How to keep your Best Business Ideas Secure as Trade Secrets.
If you require any further advice or feel that there are grounds for you to make a claim, then please contact us at Tri-meridian and we will be more than happy to help you how ever we can.
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This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.