Undoubtedly, information (including knowledge and data) can be very valuable when handled correctly. Often, value can be inherent merely from aggregating otherwise discrete pieces of publicly-available information. At other times, value can arise simply by virtue of certain private information being kept secret from competitors while being exploited by its holder.
A “trade secret” is any information that has economic value, is not generally known, and whose secrecy is maintained via reasonable measures of security. To maintain whatever economic value a trade secret has, the trade secret must be kept secret from competitors. A trade secret can maintain its legally protected status only when its owner’s efforts to keep it secret are reasonable under the unique and dynamic circumstances and risk environment of that particular secret. Typically, a company’s trade secrets account for the vast majority of its intellectual properties, yet often go unrecognized, unappreciated, and rather poorly protected.
Let’s give a special call-out to one potentially very valuable category of trade secrets – “know-how”, which is the knowledge of how to do something. Interestingly, in many patent licensing deals, it is the know-how, the detailed nuts-and-bolts knowledge of how to implement the patented subject matter (often in an optimized manner that hadn’t yet been figured out when the patent application was filed), that can be the most valuable part of the deal.
Of course, “positive” know-how (e.g., how to accomplish something) can be very valuable. But “negative” know-how (e.g., what not to do and/or why not to do it) sometimes can be even more valuable, reflecting the tremendous resources expended and/or the vital knowledge gained through unsuccessful experiments and/or implementations, i.e., trial and error. Just think of how competitors might be able to leap-frog your company, or successfully compete against you, if they had free access to all the knowledge gathered through your company’s expensive, prolonged, and failure-ridden efforts to finally arrive at the single best solution to its target customers’ problem!
Notably, trade secrets don’t require government registration or certification to protect them. Instead, they are protected simply by being kept secret.
Importantly, however, is the need to document each secret to establish both its scope and your company’s ownership of it. This is where most companies fall down. They simply don’t have a clear record of their most valuable trade secrets.
Even those trade secrets that are not clearly and fully documented are often protected by formal written agreements (e.g., Non-Disclosure Agreements, Employment Agreements, etc.), employee training, physical security, computer security, and/or other well-managed access control practices.
A professional IP audit can be extremely beneficial in inventorying not only your company’s trade secrets themselves, but also in examining the documents, policies, and procedures in place to protect them, as well as any weak areas in need of bolstering.