Trading Secrets. Do They Really Exist

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Frequently Asked Questions: Trade Secrets

Basics

Trade secrets are intellectual property (IP) rights on confidential information which may be sold or licensed. In general, to qualify as a trade secret, the information must be:

  • commercially valuable because it is secret,
  • be known only to a limited group of persons, and
  • be subject to reasonable steps taken by the rightful holder of the information to keep it secret, including the use of confidentiality agreements for business partners and employees.

The unauthorized acquisition, use or disclosure of such secret information in a manner contrary to honest commercial practices by others is regarded as an unfair practice and a violation of the trade secret protection.

In general, any confidential business information which provides an enterprise a competitive edge and is unknown to others may be protected as a trade secret. Trade secrets encompass both technical information, such as information concerning manufacturing processes, experimental research data, software algorithms and commercial information such as distribution methods, list of suppliers and clients, and advertising strategies.

A trade secret may be also made up of a combination of elements, each of which by itself is in the public domain, but where the combination, which is kept secret, provides a competitive advantage.

Other examples of information that may be protected by trade secrets include financial information, formulas and recipes and source codes.

Depending on the legal system, the legal protection of trade secrets forms part of the general concept of protection against unfair competition or is based on specific provisions or case law on the protection of confidential information.

While a final determination of whether trade secret protection is violated or not depends on the circumstances of each individual case, in general, unfair practices in respect of secret information include breach of contract breach of confidence and industrial or commercial espionage.

A trade secret owner, however, cannot stop others from using the same technical or commercial information, if they acquired or developed such information independently by themselves through their own R&D, reverse engineering or marketing analysis, etc. Since trade secrets are not made public, unlike patents, they do not provide “defensive” protection, as being prior art. For example, if a specific process of producing Compound X has been protected by a trade secret, someone else can obtain a patent or a utility model on the same invention, if the inventor arrived at that invention independently.

Contrary to patents, trade secrets are protected without registration, that is, trade secrets require no procedural formalities for their protection. A trade secret can be protected for an unlimited period of time, unless it is discovered or legally acquired by others and disclosed to the public. For these reasons, the protection of trade secrets may appear to be particularly attractive for certain companies. There are, however, some conditions for the information to be considered a trade secret. Compliance with such conditions may turn out to be more difficult and costly than it would appear at a first glance.

In order for information to be protected as trade secret, it shall meet the following criteria. The information must be secret (i.e., it is not generally known among, or readily accessible, to circles that normally deal with the kind of information in question). Absolute secrecy is not required. For example, trade secrets can be kept by several parties, as long as it is not known to other persons working in the field. It must have actual or potential commercial value because it is secret. It must have been subject to reasonable steps by the rightful holder of the information to keep it secret (e.g., through confidentiality agreements). While the “reasonable” steps may depend on the circumstances of each case, marking confidential documents, placing physical and electronic restrictions to access trade secret information, introducing a systematic monitoring system and raising awareness of employees are the measures taken to safeguard trade secrets.

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A company develops a process for the manufacturing of its products that allows it to produce its goods in a more cost-effective manner. Such a process provides the enterprise a competitive edge over its competitors. The enterprise in question may therefore value its know-how as a trade secret and would not want competitors to learn about it. It makes sure that only a limited number of people know the secret, and those who know it are made well aware that it is confidential. When dealing with third parties or licensing its know-how, the enterprise signs confidentiality agreements to ensure that all parties know that the secret information must not be disclosed. The company should also take reasonable measures to keep the know-how secret, such as putting access control and security measures in place and establishing internal procedures for systematic controlling and monitoring of trade secret information. In such circumstances, the misappropriation of the information by a competitor or by any third party would be considered a violation of the enterprise’s trade secrets. However, such measures will only be effective if the products could not easily be “reverse engineered” by competitors.

In general, trade secret protection confers owners the right to prevent the information lawfully within their control from being disclosed, acquired or used by others without their consent in a manner contrary to honest commercial practice.

While the determination of such practices depends ultimately on the circumstances of each individual case, in general, unfair practices in respect of secret information include industrial or commercial espionage, breach of contract, breach of confidence and inducement to breach. It further includes the use or disclosure of a trade secret by a third party who knew, or was grossly negligent in failing to know, that such practices were involved in the acquisition of the confidential information.

In consequence, the use of a trade secret by a person who acquired that information in a legitimate business transaction without negligence is not deemed illegal. For example, a competitor may purchase a product, examine the construction or composition of the product and extract the secret knowledge embedded in the product (so-called reverse engineering). Such act is not violation of trade secret protection.

Trade secrets are property rights and can be assigned or licensed to other persons. The holder of trade secret has the right to authorize a third party to access and use the trade secret information.

However, due to the secret nature of trade secret information, it is not always easy for others to determine whether the information concerned meets the conditions for trade secret protection. Therefore, compared with a patent, it is more difficult to transfer and license confidential information and to resolve disputes which may arise. Since a potential licensee needs to access the trade secret information in order to assess its value or utility, a non-disclosure or confidentiality agreement needs to be signed between the potential licensor and licensee. Further, in order to maintain the secrecy of trade secret information, a trade secret licensor should require a licensee to take reasonable steps to keep that information secret.

Most countries provide for remedies in criminal, administrative, commercial and/or civil law, in particular, tort law, contractual law and specific legislation on unfair competition.

In general, a trade secret owner can collect damages from the person who violated the trade secret for the economic injury suffered. The trade secret laws of some countries might also permit the use of injunctions, which requires the cessation of the use of any products that have been created through the use of trade secret information contrary to honest commercial practices. In some countries, for particular cases of trade secret violation, criminal penalties are available.

According to Article 10bis of the Convention for the Protection of Industrial Property (Paris Convention), member States have to provide effective protection against unfair competition. However, the Paris Convention does not mention or define trade secrets beyond the general protection against any act contrary to honest commercial practices.

While the conditions for trade secret protection vary from country to country, some general standards on trade secret law are found in Article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). According to that Article, trade secret protection is available if the following conditions are met:

  • The information must be secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  • It must have commercial value because it is secret; and
  • It must have been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

WIPO Lex provides easy access to legislation with respect to trade secrets from a wide range of countries and regions.

In countries with market economy systems, both in the developing and developed world, fair competition between enterprises is considered as the essential means for satisfying the supply and demand of the economy, and serving the interests of the consumers and the society as a whole. Further, competition is one of the main driving forces of innovation. The law of unfair competition, including trade secret law, is considered necessary to ensure the fair functioning of the market and to promote innovation by suppressing anti-competitive business behaviors.

Business and practical considerations

There are essentially two kinds of trade secrets. On the one hand, trade secrets may concern valuable information that do not meet the patentability criteria, and therefore can only be protected as trade secrets. This would be the case for commercial information or manufacturing processes that are not sufficiently inventive to obtain a patent (though the latter may qualify utility model protection). On the other hand, trade secrets may concern inventions that would fulfill the patentability criteria, and therefore, could be protected by patents. In that case, the company will face a choice: to patent the invention or to keep it as a trade secret.

Some advantages of trade secrets include:

  • trade secret protection is not limited in time (patents last in general for up to 20 years). It may continue indefinitely as long as the secret is not revealed to the public;
  • trade secrets involve no registration costs (though keeping the information confidential may entail high costs in certain cases);
  • trade secrets have immediate effect; and
  • trade secret protection does not require compliance with formalities or public disclosure.

There are, however, some concrete disadvantages of protecting confidential business information as a trade secret, especially when the information meets the criteria for patentability:

  • 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 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.
  • A trade secret may be patented by someone else who developed the relevant information by legitimate means, for example, inventions developed independently by others.
  • Once the secret is made public, anyone may have access to it and use it at will. The more people know about the trade secret, the more difficult it will be to keep it secret. Trade secret protection is effective only against illicit acquisition, use or disclosure of the confidential information.
  • A trade secret is more difficult to enforce than a patent. Often, it is quite difficult to prove the violation of trade secrets. 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.
  • Due to their secret nature, selling or licensing trade secrets is more difficult than patents.

While patents and trade secrets may be perceived as alternative means of protecting inventions, they are often complementary to each other. Often trade secret law complements patent law in earlier stages of the innovation process by allowing inventors to work on their ideas until they become a patentable invention. Moreover, valuable know-how on how to exploit a patented invention in the most commercially successful manner is often kept as a trade secret.

  • When the subject matter which has been kept secret is not patentable.
  • When the likelihood is high that the information can be kept secret for a considerable period of time. If the secret information consists of a patentable invention, trade secret protection could be attractive if the secret can be kept confidential for over 20 years (duration of patent protection) and if others are not likely to come up with the same invention in a legitimate way.
  • When the trade secret is not considered to be of such great value to be deemed worth a patent (though a utility model may be a good alternative in countries where utility model protection exists).
  • When the secret relates to a manufacturing process rather than to a product, as products would be more likely to be reverse engineered.
  • Before filing a patent and during the patent prosecution process until the patent application is published by the patent office (generally after 18 months from the filing date or the priority date).

It is important to bear in mind, however, that trade secret protection may be more difficult to enforce in most countries, that the conditions for, and scope of, its protection may vary significantly from country to country and that significant and possibly costly efforts to preserve secrecy may be required. Further, it has to be kept in mind that, once the secret is made public, the protection ends. WIPO Lex provides easy access to national and regional legislation on patents, utility models, competition and undisclosed information (trade secrets).

Trade secrets are widely used by business. In fact, many companies rely heavily on trade secrets for the protection of their intellectual property (although in many cases, they may not even be aware that trade secrets are legally protected). Known examples are the Coca Cola formula and sources codes for software. It is important, therefore, to make sure that enterprises take all necessary measures to protect their trade secrets effectively. This includes:

  • Firstly, considering whether the secret is patentable and, if so, whether it would not be better protected by a patent.
  • Secondly, making sure that a limited number of persons know the secret and that all those who do are well aware that it is confidential information. For example, such steps can include restricting access to buildings, marking confidential documents and establishing IT security.
  • Thirdly, including confidentiality agreements within employees’ contracts. Under the law of many countries, however, employees owe confidentiality to their employer even without such agreements. The duty to maintain confidentiality on the employer’s secrets generally remains, at least for a certain period of time, even after the employee has left the employment.
  • Fourthly, signing confidentiality agreements with business partners whenever disclosing confidential information.

The business that holds the trade secret is responsible for making every effort it can to keep it confidential. Employees can be required to sign agreements that protect trade secrets. In particular, when contractors or employees leave, it is important to make sure that they will not compete with the business after they leave, in addition to signing a confidentiality agreement. Those agreements are known as confidentiality, non-disclosure and non-compete contracts. If those agreements are violated, an employee might face penalties, along with damages to the company. However, it has to be kept in mind that those contracts should not restrict the contractor’s or employees’ rights to earn a living.

It is possible that more than one person or entities can claim rights to the same trade secret on the same technology or commercial information if both independently developed that technology and both take reasonable steps to keep it a secret, as long as the technology is not “generally known”.

More questions?

If you couldn’t find an answer to your question on this page or through the Trade Secrets homepage, then feel free to contact us.

Disclaimer: The questions and answers provided on this page serve a purely informative purpose and are not a legal point of reference. They do not necessarily represent the official position of WIPO or its member states.

Trading Secrets. Do They Really Exist?

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Member Since May 09, 2020 1 posts jonathan89park May 09 2020 at 11:01

People are always trying to find ways to improve their trading results by trying many different strategies and plans. Are there any secret forex strategies that we should all know about? and the answer is no. In fact, many of the strategies that claim to be “special” or “secret” are usually short term, temporary methods that are not durable and loses its charm throughout longer periods. In the world of forex where the market fluctuates constantly, special or secret strategies do not exist. Indeed it may work for some people for a certain amount of times, but it’s not effective in the long run, therefore you can certainly call it unique, but not quintessential.

What we see a lot in the world of forex is the useless “secrets” that will magically make you become successful and achieve everything. The truth is that those “secrets” are nothing more than well-presented useless information that seems like an expert create it. There are so many similar articles and strategies out there that brings the wrong ideas to traders for guaranteed profit and success. They are just another marketing scheme that a lot of people have been using, which you should always let it slip past. There are no proven methods of which most of these are advertising for, and they are mostly based on lack of knowledge, rather than being based on the opinions of the current market situations.

These “secret” articles and strategies are frequently written and published on the internet every day. A large number of traders in the forex community around the world are mostly very easily tempted to earning a large profit and to become successful. You can’t really say its “secret” or “special” when everybody around the world knows it and can access it easily just by going on the internet. Choices of vocabularies such as secrets, special or successful are very powerful. These are the words that draw those innocent tempted traders in just to present not so secret information.

The forex market does not take breaks. It moves up and down continuously. There is no time for you to be looking up unnecessary, useless so-called secrets to waste your time.

19 Strange Things That Really Exist

The internet plays a tremendous role in people’s lives. Thanks to it, we know a lot about unusual things, events, and people. Still, sometimes we come across really strange things that it’s hard to believe in.

Bright Side collected almost 2 dozen pictures that made thousands of people rack their brains until they figured out what they were looking at. If you are good at detective puzzles, try to understand what’s depicted in the photos without looking at their descriptions!

19. “Found in China: edible, sweet, honeycomb-like object.”

This is what the honey of wild bees looks like. Some people call it stone honey. Under the influence of natural factors, nectar crystallizes rapidly and turns into a solid substance. Some people consider it a separate type of honey, rare and valuable among gourmets.

18. This was found in an old jar of juice.

This homemade juice was fermented, and it turned into vinegar. Mycoderma aceti, also known as “mother of vinegar,” was formed inside. Despite its appearance, it is absolutely harmless. It can be used for the further production of vinegar.

Trading Secrets. Do They Really Exist?

I have been working at MME Group full-time for more than 5 years

We’re just gonna dive right into this one: MME group has an incredible lack of pros, both in terms of working there AND in terms of professionals on staff. The general skill level of production workers has ebbed and flowed but the company promotes itself as a “leader in employee training and recognition.” This is absolute nonsense. The training that takes place usually doesn’t include temp employees (which there are a lot of) and is generally useless. Next pro: Contract manufacturer! What this means is we’ll make you sign a contract and then hold up your timeline as best we can. We will ensure that you don’t get your product on time and when you get it it will most likely need several more revisions before it’s correct or properly functional! Citing years of experience going through this process at this company. It’s awesome. Customers LOVE it. Last pro for now: We promote from within! What we promote though isn’t employees, it’s culture! A culture that our leadership no longer adheres to because the sole owner systematically destroys motivation to do so. But we have parties sometimes, so I guess those get promoted. But we DEFINITELY don’t promote the employees. Lateral transitions are very common, but there’s a huge stalemate when it comes to moving into any sort of management role. Stalemate? More like complete blockage due current middle-management’s fear of being rendered useless *cough production/logistics cough.* I guess someone made the transition from production to shipping once but he’ll quit soon enough after failing to be trained properly, lacking etiquette and then crashing and burning.

Abusive ownership and management: On several occasions I have been verbally abused by the owner of the company. One of the core components of the company culture is “living above the line” but coworkers frequently use the excuse of “I’m going to go below the line” and then make disparaging remarks. Aggressive profanity is the norm. On any given day a person can walk by the president’s office and hear a tirade of profanity-laced yelling being directed back and forth. I believe that this is commonly referred to as a “hostile work environment.” Production environment: There are good workers here. They do a good job of keeping their heads down and staying as far away from leadership roles as possible because of how abusive the management is. Racism/Sexism: I wish this part was a joke but it’s not. Harassing language has been an issue in the past in the office. Racist jokes during meetings from the ownership are not uncommon. It’s basically the norm though so it’s only uncomfortable these days when a stranger is around.

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