Can you keep a secret?

Sometimes keeping quiet about a new product, service or venture can be difficult. While it may be difficult to fight the urge to tell everyone on the street all about your new innovative process, formulation or gadget, it is wise for a business to take a bit of time and see whether the new innovation is protectable under one of the theories of intellectual property law.

Some of the available protections such as trade secret require the business to take certain actions, or act in a certain way, and if not properly done, the protection under the law may be lost forever. In these cases we often discuss some of the more well-known intellectual property protections such as patents, copyrights and trademarks.

However, sometimes an item, process or other valuable information or asset is not patentable for one reason or another, or the inherent limitations of a patent (e.g., its limited term of protection) do not make it an ideal choice for a company. In these situations, protecting the innovation as a trade secret may be a possibility and could add great value to a company.

In Colorado the definition of a trade secret is pretty broad.  t covers “the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.”

Basically, think of the “secret formula” to Coke as an example.  There are a few things to note about this definition. The first thing is that it doesn’t have to be your product or a tangible item, it could be data, technical information, or the process you use to create your product or deliver your service.

Many times, companies will look at what they do and figure they don’t have anything protectable because the end product or service is not necessarily unique.  However, they never give thought to how they create the product or deliver the service. If their process is innovative and not known to the public, then it can qualify as a trade secret. However, it is important to identify potential trade secrets early on because their validity heavily depends on how the business treats the trade secrets.

To be a trade secret “the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.” While it may seem obvious in order for something to be a trade secret, it must be in fact secret. In practice this is actually more of a sticking point than one would imagine. The rule concerning secrecy includes people within the company itself.

For example, if the receptionist knows the detailed ins and outs of the process you use to create your whiz-bang product – it’s probably not a secret. Likewise, if your marketing department puts out a marketing pamphlet bragging about the specific algorithms that your software has that your competitor doesn’t, its probably not a secret.

Within the company trade secrets must be kept on a need to know basis. Those knowing of or possessing the trade secrets must also take reasonable precautions to keep the trade secret secret.  This includes password protecting computers that have the trade secret on them, implementing restricted access for any part of the building in which the trade secrets are being practiced, having restricted access for network resources utilizing the trade secrets.

Failure to observe such practices can result in the loss of a trade secret and loss of the ability to go after a competitor or other third party for misappropriation of that information latter on down the line. Therefore, it is important at the outset to identify potential trade secrets and take the appropriate steps to protect them. Additionally, once you have your systems to protect the trade secret, you need to stay on top of them because after all it only has protection from misappropriation if it is secret. If at any time the cat gets out of the bag – game over.

Just as any other type of intellectual property protection, trade secrets are another tool in a company’s toolbag and should be considered when rolling out a new product or service, or even to protect existing internal operations. These determinations need to be made early on to ensure that what you view to be your trade secrets are really trade secrets under the law.