Whether it’s a recipe or business strategy, every business has one unique thing that distinguishes it from its competitors. These are sometimes known as trade secrets. Unlike other forms of intellectual property, such as patents and trademarks, which are protected by public disclosure, trade secrets are protected by keeping them confidential. Therefore, knowing how to protect trade secrets is crucial for ensuring your business maintains a competitive advantage. In this guide, we'll cover:
What constitutes a trade secret
The legal framework for trade secret protection in the UK
Legal remedies for trade secret theft
Employee education and training on the importance of confidentiality
What Constitutes a Trade Secret
According to the Trade Secrets (Enforcement, etc.) Regulations 2018, a trade secret is defined as secret information with commercial value because it is secret and has been subject to reasonable steps to keep it secret. These could include formulas, processes, designs, customer lists, or business strategies. Trade secrets differ from other types of intellectual property, such as patents, trademarks and copyrights, because they are kept confidential to preserve value.
Real Examples of Trade Secrets
There are so many real trade secrets in the world. At Lawhive, just two of our favourites are:
Coca-Cola Formula: This formula is one of the world’s best-guarded secrets. Since the 19th century, no one has been able to duplicate it because only a few individuals have access to it. This shows that the company has taken significant steps to protect its trade secret, which has helped maintain its relevance in the soda industry.
KFC’s Secret Recipe: Another famous trade secret is the mixture of ingredients and spices used in Kentucky Fried Chicken. KFC goes to great lengths to keep this recipe hidden. They even get their ingredients from multiple suppliers to prevent any single business from knowing the complete recipe. These methods have allowed KFC to maintain its unique taste and protect its trade secret for as long as possible.
Legal Framework for Protecting Trade Secrets in the UK
In the UK, trade secrets are protected by a legal framework to prevent them from being unlawfully disclosed or used by market competitors.
Trade Secrets (Enforcement, etc.) Regulations 2018: This legislation aligns UK law with the EU Trade Secrets Directive. It also provides businesses with statutory protection against the unlawful acquisition, use, or disclosure of trade secrets. Before this legislation was introduced, trade secret protection in the UK was regulated by common law. But with this legislation, the rules for trade secret protection are clearer and more consistent. This allows companies to seek legal recourse if their trade secrets are misappropriated.
Common Law Duty of Confidentiality: Besides the statutory regulations, businesses can rely on the UK common law duty of confidentiality. This principle applies when information is shared in circumstances that imply an obligation of confidence, even if no formal contract exists. Under common law, businesses can pursue equitable remedies such as injunctions, damages, and accounts of profits.
Best Practices for Protecting Trade Secrets
Trade secrets aren’t officially registered with a regulatory body. This means that you’ll have to take proactive steps to protect them. Understanding how to protect your trade secrets makes all the difference in your quest to maintain market relevance. It also helps to apply some of the following best practices:
Identify and Classify Trade Secrets: Businesses should thoroughly audit their proprietary information to identify what qualifies as a trade secret. After this, the information should be classified and labelled accordingly to raise awareness about its importance and sensitivity.
Implement Non-Disclosure Agreements (NDAs): Non-disclosure agreements are critical legal tools for protecting trade secrets in the UK. So, ensure that all employees, contractors, and business partners sign carefully drafted NDAs that explicitly define the scope of confidential information and the consequences of breaching confidentiality.
Physical and Digital Security Measures: Another way to protect your trade secrets is to implement robust security measures. These include secure storage for physical documents, encryption for digital files, and access control measures to limit who can view sensitive information. Ensuring that only essential personnel can access trade secrets is key to maintaining confidentiality.
Steps to Take if a Trade Secret is Compromised
Even after applying these best practices, there might be instances where your trade secret is compromised or stolen. This is known as trade secret theft, and it can be solved by claiming these legal remedies:
Responding to a Breach: The best way to salvage a situation of trade secret theft is to act quickly. This may involve issuing an injunction to prevent further disclosure, filing a claim for damages, or seeking other legal remedies under the Trade Secrets Regulations. Remember that claims of trade secret theft or compromise must be brought within six years of the alleged unlawful acquisition, use, or disclosure. Therefore, the earlier action is taken, the better the chance of preventing further harm.
Pursuing Legal Action: Another option is to pursue legal action in court. Courts can grant various remedies for trade secret breaches, including injunctions to prevent further misuse, compensation for damages, and the destruction or recall of any products created using stolen information.
Employee Education and Training
A major way to ensure your trade secret remains protected is through employee education and training. Here’s how to go about this:
Conduct Regular Training Programs: Ensure all employees receive regular training on confidentiality and the specific measures required to protect trade secrets. You can also train employees on the physical and digital security protocols created to secure trade secrets. Additionally, their training should include how to identify and report suspicious activity. This will ensure that staff members understand their role in safeguarding sensitive information.
Create Exit Procedures: Implement clear procedures for employees leaving the company to ensure they don’t take confidential information with them. This can include returning company devices, signing post-employment confidentiality agreements, and deactivating access to company systems.
Legal and Regulatory Considerations
When it comes to trade secret protection in the UK, there are certain legal and regulatory considerations involved:
Trade Secrets (Enforcement, etc.) Regulations 2018
This Trade Secrets (Enforcement, etc.) Regulations 2018 provides businesses with statutory remedies for the unlawful acquisition or use of trade secrets. Some of these remedies include injunction, damages, and destruction of documents containing the trade secret. This legislation also ensures that companies can act legally against individuals or organisations that misappropriate confidential information. However, it also provides a limitation period of six years from the date of the alleged unlawful acquisition, use, or disclosure of the trade secret.
Non-Disclosure Agreements (NDAs)
NDAs are common tools used by companies to protect confidential information. They provide an extra layer of contractual protection to prevent exposing your trade secrets. Therefore, businesses should ensure that robust NDAs are in place, outlining the legal consequences of any breaches of confidentiality. The best thing about NDASs is that they allow you to set out specific conditions for disclosing confidential information and how long they can be used.
FAQs
What is considered a trade secret under UK law?
Under UK law, a trade secret is information that is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it secret.
How can I protect my business’s trade secrets from competitors?
You can protect your business’s trade secrets through any of the following means:
Conduct a thorough audit of confidential information to identify what qualifies as trade secrets and classify them accordingly
Implement non-disclosure agreements
Implement robust physical and digital security measures
What should I do if an employee discloses a trade secret?
If an employee discloses a trade secret, you can solve this by:
Investigating the disclosure
Enforcing any NDA signed by the employee
Quickly notifying relevant parties to limit the spread of the trade secret
Consider filing for an injunction in court to prevent the trade secret from leaking any further
Depending on how serious the breach is, consider taking disciplinary action against the employee
What legal remedies are available if my trade secret is stolen?
You can respond by issuing an injunction to prevent further disclosure, filing a claim for damages, or seeking other legal remedies under the Trade Secrets Regulations. You can also pursue legal action in court.
How do I ensure employees understand the importance of confidentiality?
You can achieve this by conducting regular training programs and implementing clear procedures for when employees leave the company. This helps to ensure that they don’t take confidential information with them.
Conclusion
Trade secret protection in the UK also involves employing best practices such as identifying and classifying trade secrets, implementing NDAs, and implementing robust security measures. Conducting regular training for your employees could also go a long way. In cases where your trade secret has been compromised, it’s best to act quickly to claim the legal remedies available for trade secret theft.
For personalised advice on trade secret protection, consult with our commercial lawyers and commercial law experts at Lawhive. These experts can also help you with legal strategies to safeguard your business’s proprietary information.