How to Protect Trade Secrets

4th October 2021

Most people are familiar with the main intellectual property rights that can be protected by registration – but how can you protect other valuable assets such as confidential information and trade secrets?

Take for example the well-guarded recipe for Coca Cola…

A search on the internet will throw up many results for the alleged recipe, but the full formula is one of the most closely guarded trade secrets in the commercial world. The company itself asserts that the recipe is only known to two employees at a time and they are not permitted to travel together to protect the company’s legacy. When one dies, the other must choose a successor within the company to impart the secret formula to. Furthermore, the identity of the two employees in possession of the full recipe is itself a secret and the only written copy of the recipe is in a vault on the grounds of the World of Coca-Cola in Atlanta. Whether this is more of a marketing strategy than a necessity is unclear, but the value the company places on the formula to their precious syrup is very clear.

But what less dramatic steps can be taken to protect confidential information in smaller businesses? 

It is generally accepted that for information to be protected under the common law of confidentiality, the information itself must have the necessary quality of confidence. Whether your information meets this hurdle will depend on the individual circumstances and whether it could be argued that the information is already in the public domain. However, there are steps you can take to help protect your information and help you meet the hurdle of confidentiality.

Firstly, review your business to identify what information is confidential and valuable to your business, and consider whether the information would potentially damage your business if leaked to other parties. Once you know what information needs to be protected, you should ensure that you are treating this information as confidential and that no one can be in any doubt as to the value you place on it. Ensure the information is marked as confidential and restrict access to only those who need to know it. You should then easily be able to demonstrate that the information is confidential in nature and has been treated as such by your company.

Secondly, the information must have been imparted in circumstances that create an obligation of confidence.

This is an objective assessment of whether the recipient of the information knew, or ought to have known, of the confidentiality attached to the information. For this reason, if you have a new product in development or if you are sharing any confidential information outside of your business, you should ensure that any discussions with third parties are conducted on an explicitly confidential basis and consider the use of Non-Disclosure Agreements or Confidentiality Agreements. If third parties will not agree to enter into a Non-Disclosure or Confidentiality Agreement, keep discussions at a high level of generality. You should also review your company’s employment contracts to ensure they include suitable confidentiality provisions that include details of the level of confidential information they may be privy to and how such information should be treated by them.

Finally, to protect your business against unauthorised disclosure, you should not only take the above steps, but also keep the matter under continuous review to ensure your policies grow and adapt with your business.

In summary, you must be proactive to protect your business’ confidential information and trade secrets, but the rewards it can bring to the value of a business are worth the investment and time required.