TRADE SECRET- Everything You Need to Know About

Generally, there are four types of intellectual property rights such as Patent, Trademark, Copyright and Trade secret where trade secret is most well-known types of intellectual property rights among four.

What is Trade secrets?

A trade secret can be any information that is valuable to a company, not generally known, and not readily ascertainable through lawful means, as long as the trade secret holder has taken reasonable precautions to protect it. A classic example of a trade secret is the formula for Coca-Cola.

In other word we can say that trade secret is something which add economic value to a business by putting efforts to maintain secrecy. The cost for maintenance of trade secret is maintaining its secrecy not disclosing it in public.

Trade secrets may differ across jurisdictions but have three common traits, Not being known to public, offering some economic benefit to its holder because the information is not publicly known, and Being actively protected where the holder makes reasonable efforts to maintain its secrecy.

The trade secret can be used for any method, formula, R&D information, Software algorithms, Ingredients, device, process, or any information that gives the business a unique competitive advantage over its competition. Anything that gives you an advantage against a competitor is highly valuable and worth protecting. 

Patents or Trade Secrets?

The trade secrets may be divided in two types, the first type of trade secret may be for those invention or manufacturing process that doesn’t meet the patentability criteria such as are novel, involve an inventive step, and can be used in or by the industry and therefore can only be protected as trade secrets. 

The second type of trade secret may be for the inventions that would fulfil the patentability criteria and could therefore be protected by patents, but the owner doesn’t want to disclose the invention to public and want to keep it as a trade secret by not disclosing it to public by filing patent for the invention or method.

Advantages of trade secret includes:

It is being limited in time (patents last in general for up to 20 years). It may therefore continue indefinitely as long as the secret is not revealed to the public

No requirement of registration costs (though there may be high costs related to keeping the information confidential)

It has immediate effect.

Does not require compliance with formalities such as disclosure of the information to a Government authority.

Also there are some disadvantages of protecting confidential business information as a trade secret, especially when the information meets the criteria for patentability. The disadvantages includes:

If the secret is embodied in an innovative product, others may be able to inspect it, dissect it and analyze it (i.e. “reverse engineer” it) and discover the secret and be thereafter entitled to use it. Trade secret protection of an invention in fact does not provide the exclusive right to exclude third parties from making commercial use of it. Only patents and utility models can provide this type of protection.

Once the secret is made public, anyone may have access to it and use it at will.

A trade secret is more difficult to enforce than a patent. The level of protection granted to trade secrets varies significantly from country to country, but is generally considered weak, particularly when compared with the protection granted by a patent.

A trade secret may be patented by someone else who developed the relevant information by legitimate means.

Here are some examples of famous trade secrets, many of them well-known in popular culture:

The Google Search Algorithm 

Google developed a search algorithm and continues to update it. Some changes are announced but many are not. Google continues to modify its top secret algorithm to keep businesses and people from gaming the system. It is well known top search engine among us today and shows no signs of giving up its place. 

Kentucky Fried Chicken (KFC)

The secret ingredients for KFC’s original recipe were originally kept in Colonel Sanders’ head. He eventually wrote the recipe down, and the original handwritten copy is in a safe in Kentucky. Only a few select employees know the recipe, and they are bound by a confidentiality agreement. 

As it is a trade secret, it is not open to public much about it, there are many rumours of other requirements about the secret recipe. Some sources says that for better protection, two separate companies blend a portion of the herb and spice mixture. Then it is automatically processed to standardize the blending before it is sent to the restaurants. Some says when KFC updates its security systems, the recipe is temporarily moved to secure location in an armored car escorted by a high-security motorcade. 

Coca-Cola 

Coda- Cola made a choice to brand the recipe a trade secret instead of patenting it, which would have lead to the disclosure of the ingredients. Since one of those ingredients may have been cocaine, Coca-Cola decided to keep the recipe as confidential information. 

This trade secret has spawned rumors of its own. One is that the recipe contains bugs or insects. Another is that two employees each know only half the recipe or that only two people know the combination to the safe where it is stored. 

In case you doubt it, corporate spying is real. In 2006, an employee and two accomplices stole the formula and tried to sell it to Pepsi. Pepsi played a remarkable role by letting the Coke officials know what was happening. The employee and friends were arrested and legal action was taken against them by coke official. 

McDonald’s Big Mac Special Sauce 

The special sauce recipe was a trade secret so secret it got lost in the 1980s during reformulation. Nobody noticed it missing until an executive wanted to bring the original back. Fortunately, McDonald’s was able to retrieve the recipe from the original person or company that originally produced the sauce, as the recipe was still in the records. 

Trade secrets confer a competitive advantage in a free market. Some of those secrets are no longer secrets but still function as marketing devices. Other secrets would probably seem very mundane if revealed to the public. Occasionally, as with Twinkies, the trade secret is language that could be off-putting to the intended buyer.

New York Times Bestseller List 

The New York Times has the most influential book list in the country, and it will not disclose its definition of a best seller. It apparently is not merely the number of books sold since a book that has sold fewer copies than another can make the list while the better selling book does not. 

It is known that the Times gets information from independent book bookstores, chain stores, and wholesalers about sales figures, but that is the extent of the knowledge. The Times refuses to disclose its system because they fears publishers would then use the information to manipulate sales data to their advantage. 

Listerine 

Listerine is a popular example of a trade secret. The inventor of Listerine licensed the secret formula to Lambert Pharmaceuticals. Lambert (now Pfizer) made royalty payments to the inventor’s family for over 70 years, even though the formula was revealed during that time. 

Once the Pfizer tried to stop payments after paying more than $20 million for a formula that was no longer secret. It sued, in response the court ruled that the contract did not stipulate that payments could be stopped if the trade secret was legitimately discovered by others, especially since Pfizer had acquired the formula when it was still secret. 

WD-40 

The WD-40 was developed to prevent corrosion originally. The chemist kept the formula secret and sold it a few years later. Even now, it is the company’s only product. Just like Coca-Cola, the secret formula has never been patented, so competitors could not discover about it. The company does reveal what is NOT in the formula, including a statement that there are no known cancer-causing agents. 

The formula has been in a bank vault for years, only taken out to change banks, and, once, to be carried by the company’s CEO to celebrate its 50th anniversary. The CEO wore armor and rode on horseback. It is said that the formula is mixed in three different cities around the globe before being given to the manufacturing partners. The formula has been reverse engineered, but the trade secret is kept for marketing purposes. 

Twinkies 

Also, the recipe for Twinkies is kept as a trade secret because the company fears consumers will not understand what the ingredients really are and stop eating them or giving them to kids. Many of the constituents are harmless but have chemical names that sometimes sound unsafe to those outside the food industry. 

Krispy Kreme Doughnuts 

While the recipe for the Krispy Kreme Doughnut has been a trade secret for 70 years, it is not really the source of competitive advantage. The real secret of the taste of Krispy Kreme Doughnuts is the process by which it is made. The company designed a process where the fluffy doughnuts roll out of the kitchen on an assembly line, still warm, to be sold quickly after being made. It is said that only a few employees have access to the recipe, and it is locked in a safe at company headquarters.