Lesson 5: Trade Secrets and Undisclosed Information
Reading time ~4 minutes
One of the most famous trade secrets in the world, the formula for Coca-Cola, is kept in a heavily guarded vault and is known to only a few people within the company. Like The Coca-Cola Company, companies around the world guard their proprietary information very carefully, often spending millions to preserve the confidentiality of information that they believe gives them an advantage over their competitors. Global protection of trade secrets has been slow to develop but has been hastened significantly by the implementation of international agreements.
Trade secrets encompass an almost infinite spectrum of information, such as:
Computer source code
International law defines secret information as that which is not "generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question."
Commercial value does not just mean dollar value; it can include anything that gives a business an advantage over competitors.
In a general sense, a trade secret is confidential information that has commercial value. Under international agreements, trade secrets are defined to include information that:
Has been subject to reasonable procedures designed to maintain its secrecy
Reverse engineering is the process of taking something apart (e.g., a device, an electrical component) and analyzing its workings in detail, usually with the intent to construct a new or similar device or program.
For example, a manufacturer may purchase a machine and disassemble it to determine what its parts are, how it is constructed and how it works. If the machine or its parts are not protected by patent, the manufacturer may produce the parts and assemble them into a new machine similar to or the same as the one the manufacturer purchased. In addition, the manufacturer may choose to improve on the machine to produce a more competitive machine.
Reverse engineering is a lawful way to obtain a trade secret in most parts of the world.
Trade secrets may be protected indefinitely so long as the information remains secret. If the secret is revealed, trade secret protection ceases.
There are many ways in which trade secret information may lose its secrecy. The most common are:
Disclosure by employees to competitors or the public at large
Nonconfidential disclosure by the company
Independent invention or discovery of the trade secret
In some cases, a company has valuable information that could be protected either by obtaining a patent or by maintaining the information as a trade secret. In the late 1800's, for example, The Coca-Cola Company elected secrecy instead of a patent on its soda formula. Refer to the table below for a comparison of trade secrets and patents.
Information must not be disclosed to be protected
Information must be disclosed to be protected
No need to register information for it to be protected
Patent must be applied for and granted in each country where protection is desired
No limit on term of protection so long as secrecy is preserved
Maximum protection is 20 years from date of filing in most countries
No guaranteed minimum term of protection; if secrets are disclosed or reverse engineered, rights may be lost
Minimum of 20 years' protection from date of filing is guaranteed once patent has been issued
Information must have commercial value
Invention must be novel, nonobvious, and useful
In the United States, unauthorized commercial use of a trade secret by a third party is prohibited by state law. Most state laws are based upon model legislation called the Uniform Trade Secrets Act. In addition, a federal law called the Economic Espionage Act gives the Attorney General sweeping powers to criminally prosecute a person for appropriating trade secrets.
As the leading exporter of technology in the world, the United States has been working to strengthen international standards for the protection of trade secrets, and international agreements now require countries to enact laws protecting against theft of "undisclosed information."
Historically, trade secret laws have not been as developed internationally as in the United States, and some foreign countries have failed to provide effective remedies against trade secret theft.
Another important area of protection is the requirement of government regulators responsible for approving marketing of pharmaceutical or agricultural chemical products to protect the undisclosed information supplied to them as part of their approval process.
As a condition for approving the marketing of pharmaceutical or agricultural chemical products, government agencies may require the submission of undisclosed test or other data. The production of this undisclosed information often involves considerable effort and expense.
Government agencies are obligated to protect this undisclosed information against disclosure and unfair commercial use. In the United States, this protection of undisclosed information extends for:
5 years for pharmaceutical products
10 years for agricultural chemical products
During these time periods, third parties will not be able to rely on this undisclosed information or on the marketing approval of that product when seeking to market competing products.
Many countries around the world have similar time periods for the protection of undisclosed information, though some do not provide specific time periods for protection against unfair commercial use.
You have now completed the Understanding Different Types of IPRs module. To proceed to the next module, How to Obtain and Protect Your IP in the United States, select Module 4 from the menu on the top left of this screen.