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Any confidential business information which provides an enterprise a competitive edge may be considered a trade secret. Trade secrets consists of manufacturing or industrial secrets and commercial secrets. The unauthorized use of such information by persons other than the holder is regarded as an unfair practice and a violation of the trade secret. Depending on the legal system, the 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.
The subject matter of trade secrets is usually defined in broad terms and includes sales methods, distribution methods, consumer profiles, advertising strategies, lists of suppliers and clients, and manufacturing processes. While a final determination of what information constitutes a trade secret will depend on the circumstances of each individual case, clearly unfair practices in respect of secret information include industrial or commercial espionage, breach of contract and breach of confidence.
Trade secrets are essentially of two kinds. Firstly, trade secrets may concern inventions or manufacturing processes that do not meet the patent-ability criteria and therefore can only be protected as trade secrets. This would be the case of customers lists or manufacturing processes that are not sufficiently inventive to be granted a patent. Secondly, trade secrets may concern inventions that would fulfill the patent-ability criteria and could therefore be protected by patents.
Some advantages of trade secrets include:
Trade secret protection has the advantage of not being limited in time (patents last in general for up to 20 years). It may therefore continue indefinitely as long as the secret is not revealed to the public.
Trade secrets involve no registration costs (though there may be high costs related to keeping the information confidential).
Trade secrets have immediate effect.
Trade secret protection does not require compliance with formalities such as disclosure of the information to a Government authority.
There are, however, some disadvantages of protecting confidential business information as a trade secret, especially when the information meets the criteria for patent-ability:
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 of an invention in fact 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.
Once the secret is made public, anyone may have access to it and use it at will.
A trade secret is more difficult to enforce than a patent. 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.
A trade secret may be patented by someone else who developed the relevant information by legitimate means
