What are trade secrets?

Coca-formula Cola’s is a closely guarded secret. McDonald’s signature sauce. The search algorithm used by Google. The dating app of Bumble. Many firms rely on sensitive information to survive, and it is one of their most precious assets. As a trade secret, each one is kept hidden.

While patent law gives exclusive inventions a lot of protection, getting a patent requires establishing that the invention is unique, non-obvious, and patentable. It also necessitates the disclosure of the innovation in the patent application. Patents are not indefinite, even if they are valid for twenty years. In contrast, trade secrecy adds an extra layer of protection to a company’s intellectual property, allowing inventions to remain hidden and potentially protected permanently.

What Information Safeguarded as a Trade Secret?

There is no general definition of “trade secret” because trade secrecy law originated at State and Federal levels. Historically, State law-governed trade secret protection, each state setting its own definitions and requirements. The Uniform Trade Secrets Act (“UTSA“), established in 1979 by the Uniform Legislation Commission to harmonise trade secret law across states, changed that. The Act and later amendments have been approved by 48 States, the District of Columbia, Puerto Rico, and the US Virgin Islands. The UTSA was successful for many years, but interstate and international enforcement problems forced the federal government to interfere. Congress passed the Defend Trade Secrets Act (“DTSA“) in 2016, including its own definitions.

Almost every corporation has a trade secret of some sort. Due to its broad definition of eligible subject matter, trade secret law protects a wide range of valuable knowledge that would not be covered under current patent, trademark, or copyright law. Almost anything that gives a person a financial or competitive advantage over their competitors is considered trade secret information. Examples include formulae and recipes, proprietary databases, business processes and procedures, cost, price, margins, overhead, manufacturing processes, proprietary computer software programmes, customer lists, and strategic plans and marketing programmes. Often, the owners of trade secrets are unaware that their material is protected under trade secret laws. Customer lists, supply chain knowledge, and even corporate development and financial strategies are often missed examples of trade secrets.

Every organisation must analyse its trade secrets and ensure that adequate safeguards are in place to ensure that the secret knowledge remains confidential. However, the knowledge will not be protected until it is kept “hidden“. If someone else discovers it independently, reverse-engineers it or the trade secret owner publicly publishes it, the organisation loses its protection. For instance, if Coca-Cola accidentally shared their secret recipe on Instagram, anyone might use it without repercussions.

What Can I Do To Keep My Trade Secrets Safe?

Physical security, digital or network security, and legal measures such as confidentiality, non-compete, and non-disclosure agreements (NDAs) are the three main kinds of protective measures.

Physical security measures could include storing the secret information in a secure location and restricting access to only those who have been pre-authorized. The vault at Coca-Cola is an example of physical security. Other organisations safeguard their secrets by limiting access to specific physical plant areas, employing keycards to monitor entry to particular rooms, and generally restricting access to only those who require it.

Firewalls, strong passwords, and restrictions on employee access to specific networks or websites are all examples of digital security measures. Because portable flash drives are one of the easiest methods for a disgruntled employee to abscond with information, they may be encrypted, restricted in use, or forbidden entirely within a corporation.

A corporation may also choose to provide specialised cell phones and portable computers for business users to limit the transmission of secret information, such as customer contact information.

Not only do confidentiality agreements, non-compete agreements, and non-disclosure agreements preserve the confidentiality of information, but so do solid operational processes that protect both the secret information and the organisation itself. Companies should, for example, guarantee that all trade secrets are labelled “Confidential“.

Companies should also train all staff on how to handle trade secrets regularly. This should occur during new employee onboarding and exit interviews with exiting employees. Employees who are newly hired should be warned not to bring in or reveal trade secrets from their previous employment. Any job agreement or thorough offer letter should include this requirement. Such safeguards may help protect both the new employee and the new employer from any trade secret misappropriation allegations.

The number of reasonable steps required to convince a court that information is a trade secret will vary. Still, it will almost certainly comprise some from each of the three categories outlined above.

Case Study: Trinidad & Tobago’s Angostura Limited

The Caribbean Sea is a warm, rich, and diverse region with hundreds of islands, each with its own culture, economy, and population of over 30 million people (UNEP). With a population of about 1.3 million people and a robust energy sector, Trinidad and Tobago is one of the region’s thirteen sovereign countries and 17 dependent territories. It is a hilly and forest-rich country that is possibly one of the most industrialised economies in the Caribbean (Inter-American Development Bank, 2007).

After European settlement, Trinidad and Tobago began a centuries-old history of distilling rum, an alcoholic beverage manufactured from molasses, a byproduct of sugar cane farming. The country has also benefited from its rich agricultural heritage, and it is a significant producer of alcoholic beverages, which account for about US$40 million in annual exports). By employing a robust intellectual property (IP) portfolio of trade secrets, trademarks, and domain names, Angostura Limited (Angostura) has made a difference in the Trinidad and Tobago economy.

Products with a distinct regional provenance

Angostura Bitters, the company’s most famous product, is produced with ingredients local to Trinidad and Tobago. The company’s Orange Bitters are created with oranges that have been cultivated and chosen by hand in Trinidad and Tobago. However, as the company grew, it began to specialise in rum goods made from sugar cane and have a long history in the Caribbean.

Sugar cane (saccharin officinarum) accounts for over 80% of global sugar production and is considered to have been domesticated as long back as 10,000 years ago in Southeast Asia. The islands of Trinidad and Tobago, with an average annual rainfall of 1,600 millimetres and a distinct rainy and dry season (Trinidad & Tobago Tourism Development Company Ltd.), provide the ideal climate for sugar cane to thrive (Food and Agricultural Organization. When colonial settlers first landed on the twin islands, they were greeted by a tropical environment moderated by trade breezes, with temperatures ranging from 22 to 31 degrees Celsius (°C).

Angostura has used the local environment to develop products with international appeal, thanks to a long history of local sugar cane agriculture and locally obtained ingredients for their bitters products.

Investing in research and development

Angostura makes a variety of items, but its bitters, which are formed of water, herbs, spices, and botanically infused alcohol, are possibly the most well-known. While they are now used in minor amounts to flavour a variety of alcoholic and non-alcoholic beverages, they were revered hundreds of years ago for their health advantages.
Medicinal tonics made of herbs and spices and kept in alcohol, which gave them their bitter flavour, are considered to have been developed in the 1700s. However, it is unclear how or who was the first to make this move; these potent concoctions eventually made their way from the doctor’s office to being utilised in alcoholic drinks.

Trade secrets, trademarks, and domain names are all protected by the law

With its principal IP approximately 200 years old, Angostura has discovered that employing trade secrets is the best method to secure its product. To that end, the corporation keeps a mystery that has been the foundation of its success under lock and key, guaranteeing that it does not get into the hands of competitors. For example, only five company directors are permitted to visit the chamber where Angostura Bitters’ components are blended. As a result of these precautions, the recipe has remained a secret since 1824, and the company has remained competitive.

Trademarks are another essential manner in which Angostura protects its intellectual property. Domestically, the company has filed over 40 trademark applications with Trinidad and Tobago’s Intellectual Property Office dating back to the late 1800s, including the Angostura name, Angostura Aromatic Bitters, Angostura Orange Bitters, and rum products like Angostura Single Barrel. Over ten trademark applications have been filed in the United States of America, including for the Angostura name, 11 in Europe, including the label for Angostura Aromatic Bitters, and 13 in Australia, including for its corporate name in Mexico and the Republic of Korea, over ten in the United States of America, including for the Angostura name.

Angostura has preserved its IP and grew from a company that only created one product to one of the Caribbean’s most extensive rum makers by combining trade secrets, trademarks, and domain names. Angostura additionally uses domain names and digital media to engage with customers and reach a wider audience. The company also owns angostura.com and angosturabitters.com, which provide further information about its products, corporate history, and aims as of 2014.

Conclusion: Although much has changed in the world since Dr Seigert first developed his bitters recipe, this recipe has remained unchanged for nearly two centuries. Angostura has been able to stay a strong competitor in an increasingly competitive market by closely guarding it as a trade secret and creating additional IP assets and strong brand identities. If the recipe can be preserved through the strategic use of intellectual property, Angostura and the Trinidad and Tobago economy could benefit for years to come. It is also interesting to note that no such structure or practices have been found in India. Despite high intellect and strong R&D, India still lags in trade secret protection. Companies should inventory their trade secrets, utilise all reasonable means to preserve them, and examine the various legal tools to safeguard these precious assets as trade secrets become more relevant in the corporate sector, the legal community, and society at large.

Disclaimer: The present article intends to provide general guidance on the subject, and you can also consult us in your specific case.