Why take trade secret asset management seriously?

Trade secrets constitute an important part of a company’s IP portfolio and they are generally any practice or process not known outside of the company. Specifically, for a practice or process of a company to be considered a trade secret it must fulfill three criteria: (1) it must be secret (2) it must provide an actual or potential economic advantage for the company (3) it must be actively protected (i.e. the company must exercise reasonable measures to maintain it as a secret).

Some examples of trade-secret include scientific processes, formulas, product blueprints, algorithms, raw or processed data, software, manufacturing processes, customer lists, financial information, market research studies, internal costing and pricing information, etc.

Trade secret asset management

Trade secret asset management is about the policies and procedures, processes and systems, education and governance defined and taken into use to help manage such assets. Simply deciding to keep something secret is not sufficient.

Current state

Many companies tend to ignore trade secrets for a variety of reasons. Some companies simply lack a good understanding and appreciation of this form of IP. Some argue that because they are not a registered form of IP, that they are somehow less important. Some feel uncomfortable dealing with trade secrets as the management of such assets poses some unique challenges. Some will say that all their IP processes and systems are geared to only handling registered forms of IP, and trade secrets disrupt things.

Why Some Take it Seriously

Trade secrets are an important part of any IP portfolio. It is no exaggeration to say that virtually every business possesses trade secrets, regardless of the size of the business or the industry sector in which it operates.

Trade secrets are an important, but oftentimes an invisible component of a company’s IP portfolio of assets. However, trade secrets can also be the crown jewels within the portfolio.

A few companies understand this and therefore take trade secrets and trade secret asset management seriously.

The Rationale

Interestingly, the trigger as to why a company first decides to take it seriously can vary greatly.

  • The theft of trade secrets by employees
  • The theft of trade secrets by entities in the ecosystem (e.g. suppliers, customers, etc.)
  • The theft of trade secrets by competitors
  • The theft of trade secrets by cybercriminals
  • Merger & acquisition activities that may impact some trade secrets of the organization
  • Joint venture activities that may impact some trade secrets of the organization
  • Investment and being asked about trade secret asset management by potential investors
  • Corporate governance considerations
  • A company’s IP out-licensing program
  • For tax efficiency reasons
  • Tax compliance (e.g. intergroup licenses and transfer pricing)
  • Companies embracing open innovation and wanting to balance openness and secrecy
  • The sharing trade secrets with others (e.g. collaboration partners)
  • Being entrusted with the trade secrets of others
  • Undocumented employee know-how and such assets potentially walking out the door
  • The fiduciary duty of Director’s & Officers when it comes to trade secrets
  • For corporate insurance considerations (e.g. trade secret insurance)
  • The recruiting of new employees oftentimes from competitors
  • The fear of contamination
  • Some IP Management Standards emerging (e.g. ISO 56005, DIN 77006)
  • Accidental disclosure
  • Trade secret asset management linked to corporate audits or assessments by others (e.g. clients)
  • Companies wanting to avail of prior user rights (i.e. possible shielding against patent infringement)
Not Just Theft

Yes, trade secret theft is one reason why companies decide that they need to take trade secrets and trade secret asset management seriously. But most interestingly, is not the only reason.

Donal O’Connell, IPEG consultant and managing director Chawton Innovation Services Ltd