Hidden IP: If it’s a secret, it may be a trade secret

Every day, businesses generate valuable intellectual property ("IP") - often without realising it. In this blog series, Andrew McDonald draws attention to some of the IP being created by businesses, which might be overlooked, undervalued or not utilised.

This blog covers the benefits of businesses’ confidential information and know-how to qualify as a trade secret and what information can be defined as a trade secret. 

Protecting trade secrets under UK law

Confidential information and know-how remain among a business’s most valuable assets. In many sectors including technology, food and drink, manufacturing, fashion and professional services, the competitive edge stems not only from the end product, but from the methods, processes, and internal knowledge that enable the business to operate. In some cases, the business may choose to trade-off disclosure of that information in exchange for the protection of a patent or registered design. In others, preserving secrecy is far more advantageous. Well-known examples include recipes, proprietary processes, formulas, source code, house styles, customer data and analytics, and internal operational documents.

Confidential information, by its nature, attracts some level of protection under the common law of breach of confidence. Copyright may also protect the expression of information recorded in documents, manuals, or software code. However, businesses should also be aware that some additional protection is available for particularly valuable information under the law of trade secrets, provided that adequate steps are taken to keep that information secret. 

Benefits of trade secret status

The main benefit of taking steps to ensure your information qualifies as a trade secret is that the mere unauthorised acquisition of information with trade secret status by another party is actionable. There is no requirement to show use or disclosure of that information to claim breach, as would be necessary for a breach of confidence action. Likewise, in obtaining preventative remedies via an interim interdict, the holder of a trade secret would only have to establish that there is a likelihood that the information has been acquired, rather than a likelihood of use or disclosure (subject to satisfying the other requirements for obtaining interim interdict).

What constitutes a trade secret?

So, what information can attract protection as a trade secret? The Trade Secrets (Enforcement, etc.) Regulations 2018 (the “Regulations”) implemented the EU Trade Secrets Directive and remain part of the UK law post-Brexit. The Regulations define a trade secret as information that:

1. Is not generally known or readily accessible to individuals who normally deal with that type of information;
2. Has commercial value because it is secret; and
3. Has been subject to reasonable steps, under the circumstances, by the lawful controller of the information to keep it secret.

This definition emphasises three essential elements: secrecy, value, and active protection. If any one of these is absent, the information may still be confidential, but it will not rise to the level of a trade secret. 

Below, we look at each of these elements in turn.

Secrecy and accessibility

For information to be considered “secret”, it need not be absolutely unknown, but it must not be generally accessible within the relevant industry. The Regulations also recognise that secrecy may relate not simply to individual components of the information, but to the particular combination or configuration that creates a competitive advantage. For example, individual manufacturing techniques may be publicly known, but a company’s unique arrangement of those steps may remain a trade secret if it is not publicly identifiable.

Commercial value

To attract protection, the commercial value of the information must derive from it being a secret. Trivial or inconsequential information does not merit the additional protection. The value may stem from: (i) the cost of developing the know-how; (ii) the difficulty competitors would face in independently recreating it, i.e. through reverse engineering; or (iii) the competitive advantage it gives the holder in the marketplace.

Reasonable steps to maintain secrecy

While the elements of secrecy and value arise from the nature of the information itself, the requirement for “reasonable steps” by the business to keep the information secret is about how it is handled. As such, this is the part of the test over which there is an opportunity to elevate ‘standard’ confidential information to trade secret status. The law does not prescribe a specific set of measures which would be required to do this, but typical examples include:

• Non-disclosure agreements with employees, contractors, and partners
• Access controls (passwords, encryption, physical restrictions)
• Employee training on confidentiality
• Document marking protocols
• Policies governing use of personal devices, cloud storage, and data transfer
• Restriction and policing of access to critical information, ensuring the information is only disclosed on a need-to-know basis.

Practical implications for businesses

For valuable know-how, taking the additional steps to obtain trade secret protection could be vital in preventing against use or disclosure, allowing for action to be taken from the point of suspected acquisition. Often situations where there is a threat of disclosure of proprietary information, time is limited and the reduced evidence burden could be the difference between success and failure in obtaining an order to forbid disclosure.

Of course, the protection is only as strong as the systems used to maintain secrecy. For businesses relying on proprietary know-how, a comprehensive audit of information assets is essential. Companies who have experienced rapid growth, regularly collaborate or take part in joint ventures or are looking to change how files are stored, should consider the need for clear policies, internal controls, and contractual safeguards to protect their know-how.

If you would like advice on protecting your businesses’ confidential information and know-how under UK law, do not hesitate to get in touch with our specialists.

As part of this blog series, Andrew wrote about the importance of database IP rights and the various types of IP protection available for databases and the importance and the various benefits of registering trade marks to protect product packaging in the market.  

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