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Trade Secrets 101: When and How Should a Company Utilize Trade Secrets?

Trade Secrets

Many companies to not understand how and when to utilize trade secrets. Trade secrets are confidential information that gives a company an advantage over its competitors. They can be anything from a unique formula for a product, to a manufacturing process, or even a customer list. Trade secrets are a valuable asset for any company, and protecting them is crucial for maintaining a competitive edge. The decision to patent an invention or protect it as a trade secret depends on several factors.

Patents vs. Trade Secrets

Here are some factors that should be considered when deciding whether to patent an invention or protect it as a trade secret:

  1. Nature of the Invention: The nature of the invention is an important factor to consider. If the invention can be easily reverse-engineered or duplicated by competitors, it may be better to protect it as a trade secret. However, if the invention is unique and difficult to replicate, a patent may be more appropriate.
  2. Competitive Advantage: If the invention provides a significant competitive advantage, a patent may be the best option to prevent competitors from copying the invention. However, if the competitive advantage is short-lived, a trade secret may be more appropriate.
  3. Cost: Patenting an invention can be expensive, and maintaining the patent can also be costly. Trade secret protection, on the other hand, may require less upfront cost. However, protecting a trade secret may require ongoing effort to maintain confidentiality.
  4. Duration of Protection: A patent provides protection for a limited time (usually 20 years from the filing date), after which the invention becomes public domain. A trade secret can potentially provide protection indefinitely, as long as the secret is kept confidential.
  5. Disclosure: To obtain a patent, an inventor must disclose the invention in a patent application, which becomes publicly available. If the invention is protected as a trade secret, disclosure is not required, and the inventor can keep the details of the invention confidential.
  6. Jurisdiction: The laws governing patents and trade secrets vary by jurisdiction. It is important to consider the laws in the jurisdiction where protection is sought.

Overall, the decision to patent an invention or protect it as a trade secret requires careful consideration of these factors and the specific circumstances surrounding the invention. It may be useful to consult with an intellectual property specialist or patent attorney to help make the best decision. Once a decision has been made, there are several key steps a company needs to take to protect intellectual property as trade secrets.

Protecting Trade Secrets

The first step a company should take is to determine what information constitutes a trade secret. This includes not only information that is clearly confidential, but also information that is valuable because it is not known to the public. Once a company has identified its trade secrets, it must take steps to protect them from being disclosed to others.

One of the most important steps a company can take to protect its trade secrets is to establish a confidentiality policy. This policy should include clear guidelines on how employees should handle confidential information, as well as the consequences for disclosing it without permission. The policy should also specify who has access to the trade secrets and under what circumstances.

Another important step is to physically secure the information. This may involve locking up documents, password-protecting files, and limiting access to only those employees who need it. In addition, companies should also implement electronic security measures, such as firewalls and encryption, to prevent unauthorized access to their confidential information.

It is also important for a company to include non-disclosure agreements (NDAs) in its contracts with employees, contractors, and third-party companies. These NDAs should specify the confidential information that is being protected, as well as the consequences for disclosing it.

In addition to these measures, companies should also be vigilant about monitoring for potential trade secret theft. This may involve monitoring the behavior of employees and contractors, as well as monitoring the company’s intellectual property for any signs of unauthorized use.

Finally, companies should take legal action if they suspect that their trade secrets have been stolen or misused. This may involve filing a lawsuit for misappropriation of trade secrets, or seeking a temporary restraining order to prevent the further dissemination of the confidential information.


In conclusion, trade secrets are a valuable asset for any company, and protecting them is crucial for maintaining a competitive edge. By establishing a confidentiality policy, physically securing the information, including NDAs in contracts, monitoring for potential theft, and taking legal action when necessary, companies can effectively protect their trade secrets and maintain their competitive advantage.